New Beneficial Ownership Interest (BOI) Reporting Requirements
On January 1, 2024 a new reporting requirement went into effect that requires millions of small incorporated businesses to electronically file a report with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) disclosing detailed information about the owners of a small business.
Where did this originate? The new filing requirements originated in 2021 with the passing of the Corporate Transparency Act (CTA). This law was passed to enhance transparency in entity structures and ownership to assist federal law enforcement agencies in combating money laundering, tax fraud, terrorism financing and other illicit activities.
**Very Important: Who has to file a Beneficial Ownership Interest (BOI) report?** Every domestic corporation, LLC, or other entity created by the filing of a document with a Secretary of State or similar office under the law of a state or Indian tribe is required to file a Beneficial Ownership Interest (BOI) report unless it qualifies for an exemption (see below). This also applies to foreign incorporated companies who were similarly filed.
The stated purpose of the BOI filing is to create a database which gives law enforcement agencies the information to “crack down on anonymous shell companies, which have long been the vehicle of choice for money launderers, terrorists, and criminals.”
Are there exemptions from filing? There are 23 categories of entities that are exempt. Unfortunately for many small business owners, most exemptions are for entities that are already subject to substantial federal or state regulations.
For example, those that file reports with the SEC, banks, credit unions, money services businesses, securities brokers and dealers, tax-exempt entities, insurance companies, state-licensed insurance producers, and accounting firms.
The following link (see Section 3-Reporting Company, Q. 1 & 2) provides a list of entities exempt from filing as well as an exhaustive list of FAQs. https://www.fincen.gov/boi-faqs
Are there any exemptions for small businesses’ that aren't in specific industries? One of the 23 exemptions includes an exemption for a “large operating company.” According to the A small business is exempt from filing if it meets all three of the following:
Employs more than 20 full-time employees in the United States,
Has filed a federal income tax or information return in the United States for the previous year reporting more than $5 million in gross receipts or sales; and
Has an operating presence at a physical office within the United States.
What about sole proprietorships? Many small businesses operate as unincorporated sole proprietorships. This business type is exempt from the Beneficial Ownership Interest reporting requirements.
What about a one-person LLC? Because single owner LLCs are required to file articles of incorporation, it meets the requirement for filing unless one of the exceptions are met.
When does the initial BOI report have to be filed?
Companies created before January 1, 2024 must file its initial BOI report by January 1, 2025.
Companies created on or after January 1, 2024 and before January 1, 2025 must file a report within 90 calendar days of the date on which it receives notice that its creation has become effective. Those created after 2024 have 30 days to file.
What kind of detailed information about ownership has to be reported?
Companies created before January 1, 2024 have to provide information about the company and about its beneficial owners.
Companies created on or after January 1, 2024 have to provide information about the company, its beneficial owners, and its company applicants.
