In 2021, The Financial Crimes Enforcement Network (FinCEN) established a beneficial ownership information requirement (BOI). Most U.S entities will now be required to report information relating to individuals who directly or indirectly own a company.
This post is to bring to your attention a new requirement that begins in 2024 and which may affect you and your business. We’ll discuss which entities are require to file, the filing requirements and due dates, and penalties if filing is not completed. This filing is NOT a part of your annual tax return and so it is important that you take steps to comply with these new rules. The following is important information to assist you with compliance.
WHEN DO YOU NEED TO FILE?
Filing due dates for the beneficial ownership report depend on when the company was founded:
- For entities founded before 1/1/24, the filing is due by 1/1/25.
- For entities founded between 1/1/24 and 12/31/24, the filing is due 90 days after the company filed formation documents.
- For entities founded after 1/1/25, the filing is due 30 days after the company filed formation documents.
The company applicant report has the same filing due dates as the beneficial ownership report, except for entities founded before 1/1/24. For entities founded before 1/1/24 there is no filing requirement for the company applicant.
If there are any updates to owners or individuals who exercise substantial control the company needs to file updated reports within 30 days of the change.
WHICH ENTITIES MUST FILE?
Both Domestic and Foreign entities have filing obligations. Domestic reporting companies include corporations, LLCs, and any other entity created by filing a document with the Secretary of State or any similar office. Foreign reporting companies are entities formed under law of a foreign country but have registered to do business in the US. There are certain entities that are exempt from filing requirements:
- Tax Exempt entities
- Inactive entities
- Other types of exempt entities:
- Securities reporting issuer, governmental authority, bank, credit union, depository institution holding company, money services business, broker or dealer in securities, securities exchange or clearing agency, other Exchange Act registered entity, investment company or investment adviser, venture capital fund adviser, insurance company, state-licensed insurance producer, Commodity Exchange Act, accounting firm, public utility, financial market utility, pooled investment vehicle, large operating company
What are the filing requirements?
There are two filing obligations: company applicant and beneficial ownership. Both filing obligations are submitted online to FinCEN.
A company applicant report identifies the individual who filed the formation documents to create or register the entity. The company can have multiple applicants if there is more than one person involved in the creation or registration of the company. The company applicant can also be someone who is not an owner of the company, like a lawyer or a CPA, if they are the individual who registered the company.
A beneficial ownership report is filed for any individual who exercises substantial control over a company or owns at least 25% of the reporting company’s ownership interest. Substantial ownership includes anyone who is a senior officer, an individual who has authority to appoint or remove officers and any individual who is an important decision maker.
If you are unsure of the beneficial ownership of an entity you are associated with, we advise you to discuss this with council to assure that you are properly meeting the filing requirements.
What information is needed for the report?
Company information needed:
- Legal Name
- Any trade names or DBA’s
- Current street address of it’s principal place of business in the U.S.
- Jurisdiction of formation or registration
- Taxpayer identification number
Individual owner or Individual Company application information needed:
- Individual name
- Date of Birth
- Address
- Identifying number from an acceptable identification document (Drivers license or passport) and the jurisdiction in which the identifying document was issued
What if I choose not to file?
The penalties are $500 per day with a maximum of $10,000 in penalties. Failure to file could also result in up to two years in prison.
The new reporting requirement will start in 2024. Please feel free to contact Wheeler Accountants, LLP if you need assistance with navigating how to determine if you are required to complete this filing or have other questions.
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