Affects Most Corporations and LLCs
- The Clock is already ticking. This Federal requirement went into effect Jan 1, 2024.
- Changes to your business could trigger the need for an Updated Report filing.
- Failure to comply by designated deadlines will result in STEEP PENALTIES.
You could be one of the millions of business owners affected by the new beneficial ownership information reporting rules from FinCEN (Financial Crimes Enforcement Network). To put it simply, the US Federal government wants to know about all “beneficial owners” of US companies.
Who Needs to File? Are you a “Reporting Company”?
Reporting Company: Any Corporation, LLC or Trust not exempt from reporting (Most businesses are not exempt.)
Beneficial Owner: A person fitting at least one of these criteria:
- Exercises what is referred to as “substantial control” over the reporting company
- Controls or has a reporting company’s ownership interest of at least 25%
The designation “substantial control” allows the Treasury Department to go beyond specific ownership and includes those with de facto control of the company. An individual exerts substantial control if they:
- Serve as a company’s senior officer
- Has authority over removal or appointment of any senior officer or a majority of the board of directors (or other governing body)
- Directs, determines, or has substantial influence over the company’s important decisions. These include areas such as the nature of the company’s business, operating budgets, major expenditures, securing business lines, compensation policies, or significant contracts’ termination.
Control can be interpreted as meaning, through majority voting power, board representation, or financial arrangements.
Applicants of a company are not considered beneficial owners themselves. However, BOI reporting requirements still apply to applicant representatives.
The trustee of a trust would be subject to beneficial ownership information reporting if they have the authority to dispose of at least 25% of a company’s assets.
An individual living overseas with a 25% ownership or substantial control of a reporting company formed in a foreign country is required to report if that company is “registered to do business with the secretary of state or similar office in a U.S. state or Tribal jurisdiction”.
What are you required to do?
1.) File an initial beneficial ownership information report
Reporting companies that existed prior to January 1, 2024, must file their initial (BOI) report by January 1, 2025 (within a year of the Corporate Transparency Act’s effective date of Jan. 1, 2024).
If a reporting company was created after January 1, 2024, they were originally allowed 30 days from the date of formation to submit their reports, but this was later changed to allow 90 days to file.
Even though this extension triples the length of the allowed filing time, it only applies to reporting companies created in the first year after the January 2024 effective date. Reporting companies created on January 1, 2025, or after would still be required to submit their initial beneficial ownership reports within 30 days of receiving their corporate registration documents.
The reporting company’s BOI report must include the following information:
- Legal name of business
- Any dba or trade names
- Address
- Federal Tax ID Number
- Jurisdiction where created
Note: The reporting company must report the information itself. A parent company can not report information on its behalf.
Companies must also provide this BOI in their initial reports:
- Complete name of individual
- Birth Date
- Street address (must be current)
- Issuing jurisdiction and the unique identifying number from an “acceptable identification document” (for example, driver’s license)
- An image of the above mentioned document
2.) Updated reporting
BOI compliance also requires that ANY changes in previously submitted BOI must be reported within 30 days of the change, including:
- Inaccurately reported information
- Arrival of new or departure of existing beneficial owners
- Changes to reporting on beneficial owners ( ex. legal name or address)
- Previously reported minor beneficial owners reaching the age of majority, must be reported in an updated report identifying them as an adult beneficial owner by the reporting company.
- Changes such as the death of a beneficial owner must be reported within 30 days of the deceased owner’s estate being settled.
Failure to comply with BOI reporting requirements could result in both civil and criminal penalties.
Penalties defined as:
“As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. That person may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.”
Who can be held liable?
“Both individuals and corporate entities can be held liable for willful violations. This can include not only an individual who actually files (or attempts to file) false information with FinCEN, but also anyone who willfully provides the filer with false information to report. Both individuals and corporate entities may also be liable for willfully failing to report complete or updated beneficial ownership information; in such circumstances, individuals can be held liable if they either cause the failure or are a senior officer at the company at the time of the failure.”
Senior officers can be held personally accountable by FinCEN for the company’s failure to comply and file required BOI reports.
This is a very timely matter. Please be advised that this is the only notice you will be receiving from us and we wouldn’t want to see you incur huge penalties.
For detailed information and to file your BOI report, visit:
https://fincen.gov/boi
Best regards,
Mark D. Klein, Esq.