Hopefully, by now, you’ve become aware of the Beneficial Ownership Information Form, commonly referred to as the BOI Form or BOI Report. The Financial Crimes Enforcement Network (FinCEN) finalized rules for this report late last year, and qualifying entities formed before January 1, 2024, have until January 1, 2025, to complete the form and electronically submit the information to FinCEN.
Any company formed during 2024 will have 90 days from “creation” to file the associated BOI form. Entities formed after January 1, 2025 will be given 30 calendar days to file the BOI report. “Creation” date is the date the secretary of state (or similar officer) “first publicly posts notice of the company’s creation” or the date your company receives a physical notice of the entity’s creation or registration.
Why is the BOI Form necessary?
The BOI Form is a requirement of the Corporate Transparency Act (CTA) and is designed to allow U.S. law enforcement and specific governmental agencies to access specific information about the ownership of designated corporate entities. The CTA provides insight into the companies and entities who conduct business or investment within U.S. markets, as well as territories or tribal jurisdictions of the United States, to help identify, combat, thwart, and prosecute acts of terrorism, as well as those who attempt to conduct money laundering or other criminal efforts through the cover of a business entity.
The Small Business Administration recently disclosed the fact that a large number of entities conducting business within the United States– more than 27 million – have no employees. What are these corporations and who owns or has a significant interest in these corporate entities?
All entities must either submit the Beneficial Ownership Information (BOI) report or verify exemption from the reporting requirements of the CTA.
What entities are required to complete the form?
Corporate entities may be required to complete the Beneficial Ownership Information Form if the company is a Limited Liability Company (LLC) or other type of corporation “created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe,” as well as any “foreign company registered to do business in any U.S. state or Indian tribe by such a filing.”
The requirement to file includes corporations, trusts, limited partnerships, Limited Liability Partnerships (LLPs), and/or any other type of entity created through any kind of filing with a Secretary of State (or similar office) within any U.S. state or Indian tribe. Reporting requirements under the CTA extend to foreign entities (businesses formed under the laws of a foreign nation) that have registered to conduct business in any state or tribal jurisdiction.
More than 20 types of corporate entities are exempted from BOI form reporting requirements, including specific large operating companies, non-profit organizations, and publicly traded companies. The exemption also applies to any entity with more than 20 full-time employees and a physical office in the United States and more than $5 million in sales or gross receipts as documented in federal informational or tax returns filed in the U.S. for the previous year.
FinCEN provides its Small Entity Compliance Guide that includes checklists to help determine if your corporation or entity qualifies for any available exemptions.
What Information Will Be Disclosed on the Beneficial Ownership Interest Form?
The BOI form requires substantial information on the company, those with an ownership interest, and any “applicant.” This includes standard information such as the name and address of your company or entity and identifying tax number such as a Federal tax ID number.
In addition, FinCEN requires information regarding the “beneficial owners” of the entity, including their full legal name (as well as any alias), address, date of birth, Social Security number, or other “unique identifying number from a government-issued identification document like a passport or driver’s license, along with the issuing jurisdiction and an image of the document itself.”
An “applicant” (a maximum of two individuals) is either the person(s) directly and primarily responsible for directing the BOI report and its filing and/or the person who actually files the BOI report with FinCEN.
Once the Beneficial Ownership Information Form is filed with FinCEN, the owners or applicant must update the form regarding any change to information pertaining to the company or a beneficial owner or applicant within 30 calendar days of the associated change.
What Happens If I Don’t File the BOI Form by the end of 2024?
The failure to file the BOI Form by the appropriate deadline (January 1, 2025 for most companies) includes exposure to civil penalties of $591 per day after the form submission deadline or informational change deadline, as well as criminal exposure of a $10,000 fine and/or imprisonment for up to two years for “willful non-compliance.”
The penalties for failure to file or update changes are draconian and substantial. The process will take most individuals several hours and/or days to assemble all the required information and complete the submission to FinCen.
We invite you to learn more about the integrated tax, legal, accounting and business consulting services of Allen Barron and contact us or call today to schedule a free consultation at 866-631-3470.