BOI Oh Boy-What’s Beneficial Ownership Information Reporting

And More Importantly, Answers to the Question Why I Should Care?

Just about the time you think the government has everything it could possibly need about you and your company, Congress passes The Corporate Transparency Act (CTA) and introduces a new, widely-required Beneficial Ownership Information Reports process. It is not something for most of America’s small businesses to ignore.

The Beneficial Ownership Information (BOI) is overseen by the Financial Crimes Enforcement Network (FinCEN – www.fincen.gov), under The U.S. Department of the Treasury. Despite its movie-villain sounding name, FinCEN’s role is a serious one. Created in 1970, FinCEN, like many things, was beefed up under the U.S. Patriot Act post-9/11. FinCEN “polices companies and individuals engaged in financial crimes, such as money laundering and the funding of terrorism within the United States.” (www.DowJones.com)

This new BOI Report procedure digs deep into a company’s ownership, control, and “beneficiaries” to disclose personal details about parties who have substantial control, substantial influence, or ownership interests of a reporting company. 

Key Highlights for FinCEN BOI Reporting

1. The CTA requires companies to report information about their beneficial owners, who are individuals that own or control 25 percent or more of the ownership interests of a reporting company.
2. The Act aims to combat illicit finance and strengthen national security by increasing transparency in corporate ownership.
3. Reporting companies have specific deadlines to comply with the Act, depending on their date of creation or registration.
4. The Act defines beneficial ownership and sets criteria for identifying beneficial owners, including the use of identifying numbers and disclosure of ownership interests.
5. Reporting companies must provide mandatory details about their beneficial owners, including their names, addresses, dates of birth, and identifying documents.
6. Companies are responsible for maintaining the accuracy of the reported information and may face penalties for non-compliance or misreporting.

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Don’t Risk the Penalties for Non-Compliance

You have enough to do with your business. Contact CCSK Law to turn this BOI Reporting over to us.
For $300 for up to two Beneficial Owners and $75 for each additional Beneficial Owner, we will gather the information, complete the BOI Report for your company, and update you as to its successful completion. For our business clients who engage us as their Registered Agent, we will not only keep your Secretary of State Registration accurate and up to date, CCSK will also meet your annual requirement to update your annual BOI Report. If we aren’t your current Registered Agent, for $125/year, we can take that off your plate, too.

Visit our BOI Reporting Information Site to learn more and join with CCSK Law to help.
Up to a $500/day penalty for non-compliance isn’t worth the risk.

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How did BOI Happen?

The CTA is a significant piece of legislation that aims to enhance transparency in corporate ownership in the United States. By requiring companies to report about their beneficial owners, the Act aims to combat illicit finance and strengthen national security. Understanding the requirements and implications of the Act is crucial for businesses to ensure compliance and maintain the integrity of their operations.

The Act introduces requires companies to provide details about individuals who own or control 25 percent or more of the ownership interests of a reporting company. These individuals are known as beneficial owners. The Act defines beneficial ownership and sets criteria for identifying beneficial owners, including the use of identifying numbers and disclosure of ownership interests.

Why did the CTA Happen

The Corporate Transparency Act (CTA) is a federal law that was enacted to address concerns related to illicit finance and national security. It is administered by the Financial Crimes Enforcement Network (FinCEN), which is a bureau of the U.S. Department of the Treasury.

The CTA requires certain companies to report information about their beneficial owners to FinCEN.

Under the CTA, a reporting company is defined as a corporation, limited liability company, or other similar entity that is created by filing a document with the secretary of state or a similar office under the laws of a state or Indian tribe. The Act also applies to foreign entities that are registered to do business in the United States. Reporting companies are required to submit a report containing specified information about their beneficial owners.

The Purpose of CTA

The CTA serves several important purposes related to national security and combating illicit finance acts. By requiring companies to report information about their beneficial owners, the Act aims to increase transparency and prevent the misuse of corporate structures for illicit purposes.

One key goal of the CTA is to enhance national security by providing law enforcement and intelligence agencies with access to company beneficial ownership information. With clarity of who ultimately owns or controls a company, authorities can better identify and investigate potential threats to national security.

Additionally, the Act aims to combat illicit finance by increasing transparency in the financial system. By requiring companies to disclose their beneficial owners, the Act makes it more difficult for individuals or entities to use anonymous or opaque corporate structures for money laundering, terrorist financing, or other illicit activities. This increased transparency can help deter and detect financial crimes, ultimately protecting the integrity of the financial system.

Overall, the CTA seeks to strike a balance between privacy concerns and the need for transparency and accountability for small business owners. By providing access to beneficial ownership information while also implementing safeguards to protect individuals’ privacy, the Act aims to promote a more secure and transparent business environment.

Timeline for Compliance

The CTA set deadlines based on a company creation. Companies that created and registered with their Secretary of State as of January 1, 2024, have until January 1, 2025, to file their initial reports. FinCEN provided this extended window, which was adjusted in the final rule, to allow companies, first of all, to find out about BOI Reporting and learn how it applies to them. It also allows companies to gather the necessary information about their company and beneficial owners.

For companies created or registered during 2024, the deadline for filing the initial report is 90 days from the date of creation or registration. This provides a shorter timeframe to encourage prompt compliance with the reporting requirements. Companies created or registered after 2024 have 30 days from the date of creation or registration to file their initial report. This shorter timeframe reflects the expectation that companies formed after the Act’s implementation should be able to promptly provide the required information.

It is important for companies to be aware of these deadlines and ensure that they gather and submit the necessary information within the prescribed timeframe. Failing to meet the reporting requirements or missing the deadlines can result in penalties and potential legal consequences.

Defining Beneficial Ownership

Beneficial ownership is a concept that lies at the heart of the CTA. It refers to individuals who ultimately own or control the reporting company. These individuals, defined as beneficial owners, may directly or indirectly own or control 25 percent or more of the ownership interests of a reporting company or exercise substantial control over the entity.

The CTA defines beneficial ownership as having two key elements: ownership and control. Ownership refers to the equity or voting interests that an individual holds in a reporting company. Control, on the other hand, refers to the ability to directly or indirectly influence or direct the management or policies of the reporting company.

Identifying beneficial owners is essential for promoting transparency and preventing the misuse of corporate structures for illicit purposes. By understanding who ultimately owns or controls a company, authorities can better assess potential risks and investigate any suspicious activities.

It is worth noting that the CTA recognizes that beneficial ownership can be complex and may involve indirect ownership or control through multiple layers of ownership. The Act provides criteria and guidelines for identifying beneficial owners, including the use of identifying numbers and the disclosure of ownership interests. Compliance with these criteria is crucial to ensure accurate and complete reporting of beneficial ownership information.

Criteria for Identifying Beneficial Owners

Identifying beneficial owners is a critical aspect of complying with the Corporate Transparency Act (CTA). The Act sets specific criteria for determining who qualifies as a beneficial owner of a reporting company. These criteria help ensure that accurate and complete information is provided to authorities.

The following are the key criteria for identifying beneficial owners under the CTA:

1. Ownership Interests: Beneficial owners are individuals who directly or indirectly own or control 25 percent or more of the ownership interests of a reporting company.
2. Substantial Control: Beneficial owners also include individuals who exercise substantial control over a reporting company, even if they do not meet the ownership threshold. Substantial control refers to the ability to directly or indirectly influence or direct the management or policies of the reporting company.
3. Identifying Number: Beneficial owners must provide an identifying number, such as a non-expired U.S. driver’s license, U.S. passport, or identification document issued by a state, local government, or Indian tribe. If none of these documents are available, a non-expired foreign passport may be used.
4. Senior Officers: In addition to individuals who own or control the reporting company, the CTA also requires the disclosure of certain information about senior officers involved in the creation or registration of the company.

By adhering to these criteria, companies can accurately identify their beneficial owners and provide the necessary information for compliance with the CTA. This helps promote transparency and prevent the misuse of corporate structures for illicit purposes.

Differences Between Direct and Indirect Ownership

When it comes to beneficial ownership, there are two main types: direct ownership and indirect ownership. Understanding the differences between these types is important for complying with the reporting requirements of the Corporate Transparency Act (CTA).

Direct ownership refers to individuals who directly own or control 25 percent or more of the ownership interests of a reporting company. These individuals have a direct equity or voting interest in the company and exercise direct control over it.

Indirect ownership, on the other hand, involves individuals who do not directly own or control the ownership interests of a reporting company but still have a significant influence or control over it through other entities or individuals. This can occur when ownership interests are held through multiple layers of ownership, such as holding companies or trusts.

Regardless of whether ownership is direct or indirect, the CTA requires companies to identify and report information about all beneficial owners who meet the ownership or control criteria set forth in the Act. This ensures that accurate and complete information is provided to authorities and promotes transparency in corporate ownership.

Reporting Requirements for Companies

Companies are required to comply with specific reporting requirements under the CTA. These requirements aim to promote transparency and prevent the misuse of corporate structures for illicit purposes. Key aspects of the reporting requirements include mandatory information to be reported and the process for submitting beneficial ownership information.

Initial Information Required for Each Company Applicant Mandatory Information to be Reported

Under the CTA, reporting companies are required to provide specific information about their beneficial owners.

The following are the mandatory pieces of information that must be reported:

1. Name: The full legal name of each beneficial owner must be provided.
2. Date of Birth: The date of birth of each beneficial owner must be reported to ensure accurate identification.
3. Address: The residential or business address of each beneficial owner must be disclosed.
4. Identifying Number: Each beneficial owner must provide an identifying number, such as a non-expired U.S. driver’s license, U.S. passport, or identification document issued by a state, local government, or Indian tribe. If none of these documents are available, a non-expired foreign passport may be used.
5. Company Information: Specific company information includes legal company name, D/B/As, officers, address, TIN, FinCIN number.

In addition to the information about beneficial owners, reporting companies must also provide certain information about themselves, such as their name(s) and address.

It is important for companies to ensure that the mandatory information is accurately reported to comply with the BOI requirements. Failure to provide complete and accurate information can result in penalties and potential legal consequences.

Submitting Beneficial Ownership Information

To comply with the reporting requirements of the Corporate Transparency Act (CTA), reporting companies must submit their beneficial ownership information to the appropriate authorities. The process for submitting this information involves the following steps:

1. Prepare the Beneficial Ownership Information Report: Reporting companies must gather all the required information about their beneficial owners, including their names, dates of birth, addresses, and identifying numbers. This information must be accurately recorded in the Beneficial Ownership Information Report.
2. Access the Secure System: Reporting companies can access the secure system provided by the relevant authority to submit their Beneficial Ownership Information Report. This secure system ensures the confidentiality and security of the reported information.
3. Submit the Report: Using the secure system, reporting companies must upload the completed Beneficial Ownership Information Report. The system will guide companies through the submission process and provide confirmation of successful submission.

It is important for reporting companies to follow the prescribed process and ensure the accurate and timely submission of their beneficial ownership information. Failure to comply with the reporting requirements or submit the required information within the specified timeframe can result in penalties and potential legal consequences.

Responsibilities of Reporting Companies

Reporting companies have specific responsibilities under the Corporate Transparency Act (CTA). These responsibilities include maintaining the accuracy of the reported information and complying with the annual reporting requirement.

Maintaining Accuracy of Reported Information

Reporting companies have a responsibility to ensure the accuracy and completeness of the information they report under the Corporate Transparency Act (CTA). It is crucial for companies to provide correct and up-to-date information to promote transparency and prevent the misuse of corporate structures for illicit purposes.

The CTA imposes an annual reporting requirement, which means that reporting companies must review and update the reported information on an annual basis. This ensures that any changes in beneficial ownership or other relevant details are accurately reflected in the reports.

Maintaining the accuracy of the reported information is essential for complying with the CTA and avoiding potential penalties. Companies should implement robust processes and procedures to regularly review and verify the reported information, ensuring that it remains current and correct.

By fulfilling their responsibility to maintain accurate information, reporting companies contribute to the integrity and effectiveness of the beneficial ownership reporting system established by the CTA.

Penalties for Non-Compliance and Misreporting

Non-compliance with the reporting requirements of the Corporate Transparency Act (CTA) or not reporting correct information can have serious consequences for reporting companies. The Act establishes penalties for such actions, including criminal and civil penalties.

Criminal penalties may be imposed on individuals or entities that knowingly disclose or use beneficial ownership information in violation of the CTA. These penalties can include fines of up to $250,000 and/or imprisonment for up to five years. If a violation occurs in conjunction with other U.S. law violations, the fines can be as high as $500,000, and imprisonment can extend up to 10 years.

Civil penalties can also be imposed for non-compliance or misreporting. These penalties can amount to $500 per day for each violation that continues. For companies that fail to comply with the reporting requirements, the penalties can be significant, potentially amounting to substantial sums over time.

To avoid penalties, reporting companies must ensure they comply with the reporting requirements of the CTA and provide accurate and complete information about their beneficial owners.

Accessing Beneficial Ownership Information

Accessing beneficial ownership information is an important aspect of the CTA. The Act allows for specific agencies and authorities to access this information.

Entities Eligible to Access BOI Reports

The Corporate Transparency Act (CTA) allows certain entities to access Beneficial Ownership Information (BOI) reports. Access to BOI reports is limited to authorized recipients who meet specific criteria and follow established security and confidentiality protocols. The following entities are eligible to access BOI reports:

1. Federal Agencies: Federal agencies engaged in national security, intelligence, or law enforcement activity can request BOI for authorized purposes related to their activities.
2. State, Local, and Tribal Law Enforcement Agencies: These agencies can access BOI in criminal or civil investigations with court authorization and when engaged in qualifying activities.
3. Foreign Law Enforcement Agencies: Foreign law enforcement agencies, judges, prosecutors, and other authorities can request BOI for assistance in law enforcement investigations or prosecutions authorized under their respective laws.
4. Financial Institutions: Financial institutions subject to FinCEN’s Customer Due Diligence Rule can access BOI with the consent of the reporting company for customer due diligence purposes.
5. Regulators: Regulatory authorities responsible for supervising financial institutions can access BOI to assess compliance with customer due diligence requirements.

Entities accessing BOI reports must adhere to strict security and confidentiality protocols to prevent unauthorized disclosure. The unauthorized disclosure of BOI is prohibited and can result in penalties and legal consequences.

Up to $500/Day Penalty – Not Worth the Risk

CCSK Law can Help Your Company Comply and Stay in Compliance

Understanding what beneficial ownership information means, how to comply, and what is necessary to stay in compliance is crucial for America’s small businesses. Deadlines, changes in BOI rules, updating BOI registration, and other additional information does not need to be a major headache for you and your business. CCSK will assist you with:

1. Identifying the parties in your company considered to be Beneficial Owners,
2. Gathering of the necessary information from each Beneficial Owner,
3. Reporting the information as required in the BOI Report,
4. Confirming with you the successful completion of the report, and
5. Maintaining your annual registration and updates.

You have enough to do with your business. Contact CCSK Law to turn this BOI Reporting over to us. For $300 for up to two Beneficial Owners and $75 for each additional Beneficial Owner, we will gather the information, complete the BOI Report for your company, and update you as to its successful completion. For our business clients who engage us as their Registered Agent, we will not only keep your State Registration accurate and up to date, CCSK will also meet your annual requirement to update your annual BOI Report. If we aren’t your current Registered Agent, for $100/year, we can take that off your plate, too.

Let us know how we can help you focus on your business, and not worry about these registrations. Up to a $500/day penalty for non-compliance isn’t worth the risk.

Frequently Asked Questions

These are a few of the FAQs you can find on the FinCEN BOI site. https://www.fincen.gov/boi-faqs

Who is Exempt from Reporting?

There are some limited BOI reporting exemptions for as to whether a company is considered to be a required reporting company. If at your company’s creation, you registered the company with a State Secretary of State you may need to report. The types of entities created and registered with the State includes corporations, limited liability companies (LLC), partnerships, limited partnerships, limited liability partnerships, or other registered entity type.

There are 23 business types which are exempt from BOI Reporting requirement. Many of them already have high levels of registration or licensing for senior officers or owners. Some examples large and small business which are exempt include banks, credit unions, bank holding companies, broker/dealers in securities, securities exchanges or clearing agencies, investment companies or investment advisors, venture capital fund advisors, insurance companies, public, registered accounting firms, public utilities, tax-exempt entities, and “Large Operating Companies” (as defined specifically in appropriate federal regulations).

One common “structure” outside the reporting company definition is used by many individuals for small, part-time business operations, and usually don’t file with a Secretary of State at the company’s creation – a Sole Proprietorship. In more recent years, sole proprietorships acquire a tax identification number in order to open accounts with a financial institution. However, that does not raise sole proprietorships to the level to complete beneficial ownership information reports.

How Often Must Information be Updated?

Reporting companies must review and update the reported information on an annual basis under the CTA. This ensures that any changes in beneficial ownership or other relevant details are accurately reflected in the reports. The updates must be submitted within a specified number of calendar days from the anniversary of the initial filing of the beneficial ownership information report. Additionally, if there are changes in a company’s beneficial ownership, that should be reported.

The BOI Report site: https://boiefiling.fincen.gov/

Can BOI Reporting be Challenged?

The Corporate Transparency Act (CTA) does not explicitly address the process for challenging beneficial ownership information reporting. However, some legal action is happening as to the Constitutionality of the BOI Report requirement. Though one State has held it as unconstitutional, FinCEN stated it will continue to follow the Regulation as written. The court case for Alabama does not appear to have any force of law outside of Alabama.

What Impact Does This Have on International Businesses Operating in the US?

The CTA applies to international businesses operating in the United States. They must comply with the reporting requirements of the CTA if they meet the criteria for reporting. The Act aims to enhance transparency and prevent money laundering by increasing disclosure requirements for beneficial ownership information.

Visit https://www.fincen.gov/boi/newsroom for the latest information about BOI Reporting.