Beneficial Ownership Information (BOI) Compliance: Update, Tracking and Reporting Administration

In 2021, Congress (in its infinite wisdom) passed the Corporate Transparency Act (CTA) that is administered by the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN). This law creates a new Beneficial Ownership Information reporting requirement as part of the U.S. government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures. You can learn more here.

The CTA imposes 100 pages of arcane rules and definitions around company reporting requirements, and most importantly, creates stiff financial penalties (up to $500 per day) and criminal sanctions (with actual jail time) for anyone failing to report, submitting false information, and not maintaining accurate and up-to-date information (i.e. beneficial owners actually have to provide their residential address, and you have no more than ninety (90) days to remember to update your information, otherwise face severe consequences).

Beneficial Ownership Information (BOI) refers to identifying information about a company, and individuals who directly or indirectly own or control a company.

For a company, this information includes the legal name, trade name (i.e. d/b/a), current street address of the principal place of business, state of registration, and a taxpayer identification number (i.e. EIN or FEIN).

For an individual, this information includes the individual’s name, date of birth, residential address, and an acceptable form of ID (See next FAQ for a list of acceptable forms of ID). For the ID, you must provide the ID Number, the issuing state or jurisdiction, and a legible image of the ID.

The only acceptable forms of identification are:

• A non-expired U.S. driver’s license (including any driver’s licenses issued by a commonwealth, territory, or possession of the United States);
• A non-expired identification document issued by a U.S. state or local government, or Indian Tribe;
• A non-expired passport issued by the U.S. government; or
• A non-expired passport issued by a foreign government (only when an individual does not have one of the other three forms of identification listed above).

All corporations, LLC’s and legal entities that are formed by submitting a document under law of a US State or Native American (Indian) jurisdiction.

This includes foreign entities that are registered to do business in any US State or Native American (Indian) jurisdiction.

Some entities are exempt from reporting requirements. Such entities include publicly traded companies, many nonprofits, certain large operating companies, and companies that are already required to register with the FTC, FCC, SEC or FinCEN, such as banks and insurance companies.

Large companies are excluded from reporting, which are defined as entities employing more than 20 FTE’s in the US, have an operating presence with a physical office in the US, and filed a US federal tax form demonstrating $5M or more in gross receipts or sales, derived from US-based sources (income derived from sources outside the US are not to be counted).

In certain circumstances, inactive entities who would otherwise be required to report, are excused from reporting. The circumstances are fairly narrow, however. You must answer “YES” to all six of the following criteria to be deemed an inactive entity excused from reporting:

• Entity has been in existence on or before January 1st, 2020
• Entity has not engaged in active business
• Entity is not owned (even partially) by a foreign person (defined as someone who is not a United States Person as defined in 7701(a)(30) of the Internal Revenue Code of 1986)
• Entity has not experienced any change in ownership in the preceding twelve (12) month period
• Entity has not sent or received any funds greater than $1,000, in the preceding twelve (12) month period
• Entity does not hold any kind or type of assets, in the US or abroad, including real property or an ownership interest in any other entity

If you want more help determining whether your company may be excluded from reporting, consider a 30-minute BOI Attorney Consult or use our FREE EXPERT SYSTEM to help you determine whether your Company must file a Beneficial Ownership Interest Report, and who is considered to have a beneficial ownership interest (BOI) in your Company.

A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over a company, or (2) owns or controls at least 25% of a company’s ownership interests.

Substantial control means an individual exercises substantial control over a company in one or more of four different ways. If the individual falls into any of the categories below, the individual is exercising substantial control:

• The individual is a senior officer (i.e. a c-level officer, such as the company’s president, chief financial officer, general counsel, chief executive office, chief operating officer, manager, or any other officer who performs a similar function)
• The individual has authority to appoint or remove certain officers or a majority of directors (or similar body) of a company
• The individual is an important decision-maker for a company
• The individual has any other form of substantial control over the reporting company as explained further in FinCEN’s Small Entity Compliance Guide (see Chapter 2.1, “What is substantial control?”)

Important decision makers are those individuals who direct, determine, or otherwise has substantial influence over important decisions made by a company, including:

• business decisions, including those involving the nature, scope, attributes, geography of the company’s products and/or services, and/or approval of important contracts
• financial decisions, including those involving the sale, lease or transfer of principal assets, or of major expenditures, issuances of equity, incurrence of debt or approval of a budget
• structure decisions, including those involving reorganization, dissolution or merger of the entity, or amendments of any substantial governance documents or significant policies or procedures

If you want more help, consider a 30-minute BOI Attorney Consult or use our FREE EXPERT SYSTEM to help you determine who is considered to have a beneficial ownership interest (BOI) in your Company.

FinCEN will permit Federal, State, local, and Tribal officials, as well as certain foreign officials who submit a request through a U.S. Federal government agency, to obtain Beneficial Ownership Information (BOI) for authorized activities related to national security, intelligence, and law enforcement. Financial institutions will also have access to BOI in certain circumstances, with the consent of the reporting company. Those financial institutions’ regulators will also have access to BOI when they supervise the financial institutions.

FinCEN is developing the rules that will govern access to and handling of BOI. BOI reported to FinCEN will be stored in a secure, non-public database using rigorous information security methods and controls typically used in the Federal government to protect non-classified yet sensitive information systems at the highest security level. FinCEN will work closely with those authorized to access beneficial ownership information to ensure that they understand their roles and responsibilities to ensure that the reported information is used only for authorized purposes and handled in a way that protects its security and confidentiality.

If you have further questions, consider a 30-minute BOI Attorney Consult.

No.

L4SB defines anonymity as “keeping ownership information off the Internet, to prevent Internet researchers from learning who owns a company.” This means banks, the IRS and others still need to know ownership information, and such information is kept confidentially and not disclosed on the Internet.

Therefore, Beneficial Ownership Interest (BOI) Reporting as required by FinCEN under the Corporate Transparency Act (CTA) does not change what L4SB defines as “anonymous”.

New companies formed on or after January 1st, 2024, must report the company, beneficial ownership interest (BOI), and the applying entity within 90-days of formation (this timeframe decreases to 30-days after Jan. 1st, 2025).

All companies, including those formed prior to January 1st, 2024, must report the company and the beneficial ownership interest (BOI) no later than January 1st, 2025. The applying entity does not need to be reported for such companies.

Finally, all companies and individuals with a beneficial ownership interest (BOI) must report any changes to information within 30-days of the change, by filing an updated report.

If you want more help, consider a 30-minute BOI Attorney Consult or use our FREE EXPERT SYSTEM to help you determine whether your Company must file a Beneficial Ownership Interest Report, who is considered to have a beneficial ownership interest (BOI) in your Company, and what triggers the need to file an updated report. We strive to keep our expert system current to within 48-hours of changes propounded by FinCEN.

Great question. We haven’t seen specific language on this, but it’s best to assume both. What this means is, the Company should be considered the entity responsible for filing an initial Beneficial Ownership Interest (BOI) Report with FinCEN, but all the Beneficial Owners should cooperate with the Company to make this possible.

A Beneficial Owner withholding information from the Company, making it difficult or impossible to identify all Beneficial Owners will violate the fiduciary duty a Beneficial Owner maintains with the Company, and probably be the one deemed responsible for the inaccurate report.

Similarly, the individuals at the Company not properly filing or maintaining the Beneficial Ownership Interest (BOI) Report with FinCEN would similarly violate the fiduciary duty such individuals would maintain with the Company, as well as be deemed responsible for the inaccurate report.

Given the severe financial consequences and criminal sanctions that govern the law around Beneficial Ownership Interest (BOI) Reporting with FinCEN, we strongly recommend this is one area to avoid trying to “gain leverage” or otherwise act in bad faith.