What is Beneficial Ownership Information Reporting and Who Needs to File
Starting on Jan 2024 the Financial Crimes Enforcement Network department is requiring businesses to file a Beneficial Ownership Information (BOI) form. The due date for existing companies is Jan 1st 2025, while companies newly formed after Jan 1st 2024 have 30 days to file the report. If this form is not filed on time, there fine of $500 per day up to the date of filing. Outlined below are the most important aspects of this form, including: who has to file, necessary information to file, and how to file the report.
Who has to file
For potential filers, both domestic and international, the best way to determine if there is a filing requirement for the BOI report is to determine if you are a small corporation or business that has filed a document with your state to become a company or to do business in the state. There are some exceptions to who is required to file. They include the following:
- Inactive Entity
- Large Operating Company
- Insurance Company
- Accounting Firm
- Broker or Dealer in Securities
- Securities Exchange or Clearing Agency
- Securities Reporting Issuer
- Governmental Authority
- Bank or Credit Union
- Depository Institution Holding Company
- Other Exchange Act Registered Entity
- Investment Company or Investment Advisor
- Venture Capital Fund Advisor
- State-Licensed Insurance Company
- Commodity Exchange Act Registered Entity
- Public Entity
- Financial Market Utility
- Pooled Investment Vehicle
- Tax-Exempt entity
- Entity Assisting a Tax-Exempt Entity
- Subsidiary of Certain Exempt Entities
The main exemption is for large operating companies. The following six criteria must all be met to be considered exempt:
- Have at least 20 full time employees
- Have at least 20 full time employees living in the USA
- Have a physical location in the USA
- Have filed a tax return for 2023 showing gross sales net of returns and allowances of $5,000,000
- After removing international sales, the gross sales must remain above $5,000,000
If you do not meet any of these qualifications for exemption, you will need to file the BOI report.
Necessary information for Filing
What will you need on hand to file this report? As you know your company better than anyone else, this list will be easy for you. You will be asked to provide the following:
- Company legal name and trade names
- Address
- Where the company was formed (domestic or foreign)
- Taxpayer Identification number
- Beneficial Owner information
The beneficial owner is anyone that owns and/or controls 25% or more of the company. The information needed from these people are:
- Full legal name
- Birthdate
- Address
- A scanned copy of identification (driver’s license, passport, etc.)
How to file
The report will be filed electronically through the website FinCEN.gov with no filling fee.
Conclusion
The BOI report will be available to file as of Jan 1st 2024, and is due on Jan 1st 2025. New companies formed during 2024, will have an earlier due date of 30 calendar days to file with no filing fee. Your company will need to file this report if you are not exempt as outlined above. This report should not be very time consuming, but refusal to file or late filing will result in a fine of $500 per day.
As the CTA is not a part of the tax code, the assessment and application of many of the requirements set forth in the regulations, including but not limited to the determination of beneficial ownership interest, necessitate the need for legal guidance and direction. As such, since we are not attorneys, our firm is not able to provide you with any legal determination as to whether an exemption applies to the nature of your entity or whether legal relationships constitute beneficial ownership. We strongly encourage you to reach out as soon as possible to legal counsel with expertise in this area to assist your organization with the steps you need to take to ensure compliance with the CTA, if applicable.
