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FinCEN Beneficial Ownership Information (BOI): Reporting Requirement

US Treasury Department's Financial Crimes Enforcement Network (FinCEN) Beneficial Ownership Information (BOI): Reporting Requirement

 
Beneficial Ownership Information Reporting

By: Debra Fowler, SHRM-CP

Director, Compliance & Policy


Beginning January 1, 2024, your business may be required to report “beneficial ownership information” (BOI) to the United States Treasury Department’s Financial Crimes Enforcement Network (FinCEN). This obligation is a result of the 2021 Corporate Transparency Act (CTA) enacted by Congress, which creates a beneficial ownership information reporting requirement to identify the individual(s) who ultimately own or control a company. The reporting requirement will help the federal government with preventing money laundering, tax fraud, terrorist financing, and any other illicit activities.


The BOI reporting will also assist the federal government in developing a database of information about who owns and operates legal entities in the United States. According to the 2022 Illicit Financing Strategy publication by the U.S. Treasury, the lack of information available to federal law enforcement agencies makes it difficult to investigate shell corporations and other “bad actors.”


Certain entities are required to file BOI reports to satisfy this requirement under the CTA, which are referred to in the FinCEN rules as “reporting companies” and individuals who file paperwork to create or register a business are called “company applicants.” The BOI reporting will require information about the reporting company, the Beneficial Owner, and possibly the company applicant. 


Under the CTA, there are two types of reporting companies: domestic and foreign.

Domestic reporting companies include corporations, limited liability companies (LLC’s), and any other entity that is created by filing with the Secretary of State or any similar offices under the law of an individual state.
Foreign reporting companies are those that are corporations, LLCs, and other entities formed under the law of a foreign country that is registered to do business in any U.S. state or tribal jurisdiction by filing with the Secretary of State or similar office under state law.

The CTA defines a beneficial owner to be any individual who exercises substantial control over a reporting company or any individual who owns or controls at minimum 25% of the ownership interests of the business.


A company applicant is a person who either directly files the documents to create an entity or who is primarily responsible for directing or controlling the filing of the relevant document by another person.


Businesses subject to this requirement will have to report company applicants to FinCEN if:

The business is a domestic reporting company created on or after January 1, 2024; or,
A foreign reporting company first registered to do business in the U.S. on or after January 1, 2024.

If a business was created before January 1 2024, (either a domestic or foreign reporting company), the Company applicant does not need to be reported to FinCEN.


Beneficial Owner Information Reporting

The information businesses will need to provide when meeting this new obligation includes:

 

Reporting Company (Both Domestic & Foreign)

  • Legal business name

  • Trade name (DBA)

  • Complete Physical Address

  • State, Tribal, or Foreign Jurisdiction of Formation (where was the business formed)

+Foreign Reporting Companies Only:
  • State or Tribal Jurisdiction of First Registration

  • IRS Taxpayer Identification Number (TIN)

  • This could be the IRS Employer Identification Number (EIN), or,

  • A tax identification number issued by a foreign jurisdiction and the name of the jurisdiction.

 

Beneficial Owner

  • Full Legal Name

  • Date of Birth

  • Complete and Current Residential Address

  • Unique identifying number and issuing jurisdiction from, and image of, one of the following non-expired documents:

    • U.S. passport

    • State driver’s license

    • Identification document issued by a state, local government, or tribe

    • If an individual does not have any of the previous documents, foreign passport

 

Company Applicant (only if the business is created on or after January 1, 2024)

  • Full Legal Name

  • Date of Birth

  • Complete and Current Business Address

  • Unique identifying number and issuing jurisdiction from, and image of, one of the following non-expired documents:

    • U.S. passport

    • State driver’s license

    • Identification document issued by a state, local government, or tribe

    • If an individual does not have any of the previous documents, foreign passport

 

Exemptions

There are some businesses that are exempt from the BOI requirements, those include, but are not limited to, banks, tax-exempt organizations, insurance companies, broker-dealers, and businesses that employ 20 or more full-time employees in the U.S. and have more than $5 million in gross receipts/sales.


The full list of exempted businesses can be found here at the FinCEN website: https://www.fincen.gov/boi-faqs


Reporting

Businesses that were created or registered as a business prior to January 1, 2024, are required to submit their BOI reports no later than January 1, 2025. Any business created or registered on or after January 1, 2024, will have 90 days to complete the BOI reporting requirements after receiving notice of their creation or registration. Businesses created or registered on or after January 1, 2025, will be required to submit BOI reports no later than 30 days after receiving notice their entity’s creation or registration is effective.


Reporting can happen anytime between January 1, 2024, and January 1, 2025, for existing businesses – you do not have to wait until 2025 to complete the requirement.


Reporting companies will report BOI electronically through the FinCEN website: Beneficial Ownership Information Reporting | FinCEN.gov. Following the completion of BOI reporting, businesses will receive a confirmation receipt indicating the information has been received.

Employers will be obligated to update any changes or corrections to BOI that was previously filed with FinCEN no later than 30 days after the change or correction occurs, including if the business would be changed to exempt under the BOI rules.


Penalties

Businesses that fail to comply with the CTA requirements may be subject to civil penalties of $500 per day and/or criminal penalties of up to $10,000 and/or two (2) years in jail for willful non-compliance.


Access to BOI Information Database

According to the proposed final rules published as of December 22, 2023, by FinCEN, anyone requesting to access BOI will be required to submit justification for their need to access the BOI database information to protect business owners’ sensitive information, and those granted the information may only use the information for purposes permitted by the CTA.


Under the proposed rules, FinCEN would be authorized to disclose BOI to five categories of recipients:


  1. Federal, State, local, and Tribal government agencies

  2. Foreign law enforcement agencies, judges, prosecutors, central authorities, and competent authorities, provided requests come through a Federal agency intermediary, and meet certain criteria.

  3. Financial institutions using BOI to comply with customer due diligence requirements

  4. Federal functional regulators and other regulatory agencies acting in a supervisory capacity assessing Financial Institutions for due diligence compliance.

  5. Officers and/or employees of the United State Treasure itself, with job duties requiring inspection of BOI, including tax administration.


The rules also indicate a requirement for strict cybersecurity controls, confidentiality protections, and audit and oversight measures.


Employer Next Steps


Identify if your business is required to complete BOI reporting before January 1, 2025, or if your business falls under the list of exempted businesses.
If you are required to complete the BOI reporting requirement, identify who the beneficial owner(s) is/are for your business (those who own or control (directly or indirectly) 25% or more of the company).
Gather the required information for the Reporting Company, Beneficial Owner, and Company Applicant (if applicable).
Complete the reporting requirement at the FinCEN website (Beneficial Ownership Information Reporting | FinCEN.gov) on or before January 1, 2025.

If you are not sure if your business is required to complete BOI reporting, contact Vida HR today, and we can try to help work through the requirements and identify your obligations.


Need help with completing the BOI reporting requirement?

Contact Lisa Carper, Vida HR's Client Success Manager, to learn about our process and fees for assistance.


You can review the BOI requirements here: LINK

You can also review FinCEN’s Small Business Compliance Guide here: LINK

 

 

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