Is Your Business Subject to the New BOI Reporting Rules?

Cassidy Hicks

Dec 06, 2023

Starting January 1, 2024, an anticipated 32.6 million businesses will be required to comply with new beneficial ownership information (BOI) reporting rules under the Corporate Transparency Act (“CTA”). BOI reporting involves the disclosure of information related to those who own or control the business. The intent of the BOI reporting requirement is to help US law enforcement combat money laundering, the financing of terrorism and other illicit activity.

Who is required to file?

Entities organized both in the U.S. and outside the U.S. may be subject to the CTA’s reporting requirements. Domestic companies required to report include corporations, limited liability companies (LLCs) or any similar entity that was either formed or registered to do business in a state by filing a document with the Secretary of State or similar office.

There are 23 categories of exemptions, including securities brokers/dealers, tax-exempt entities, and “large operating companies”. To qualify as a “large operating company”, the company must:

a) Employ more than 20 people in the U.S.;
b) Have reported gross revenue or sales of over $5M on the prior year’s tax return; and
c) Be physically present in the U.S.

Who is a beneficial owner?

Any individual who, directly or indirectly, either:

Exercises “substantial control” over a reporting company, or
Owns or controls at least 25 percent of the ownership interests of a reporting company

An individual has substantial control of a reporting company if they direct, determine or exercise substantial influence over important decisions of the reporting company. This includes any senior officers of the reporting company, regardless of formal title, even if they have no ownership in the reporting company.

What info must be provided?

Reporting companies must file a report with the Financial Crimes Enforcement Network (FinCEN) that includes the entity’s legal name (or any trade or doing-business-as name), address, jurisdiction where the entity was formed and Taxpayer Identification Number.

Additionally, information about the beneficial owners of the entity is required to be reported including — name, birthdate, address, and unique identifying number from an acceptable identification document (e.g., a driver’s license or passport).

When must companies file?

New entities (created/registered after 12/31/23) must file within 30 days of formation.
There is proposed rulemaking which would allow new entities created in 2024 only to extend the 30-day timeframe to 90 days.
Existing entities (created/registered before 1/1/24) — must file by 1/1/25.

Reporting companies that have changes to previously reported information or discover inaccuracies in previously filed reports — must file within 30 days of change or discovery of inaccuracy.

Who can help?

As the implementation period approaches, consult with your legal counsel for assistance in complying with the BOI reporting requirements. Stay informed by visiting https://www.fincen.gov/boi.