Accounting & Tax Tips
October 26, 2023

FinCEN’s Beneficial Ownership Information Reporting Rule: What You Need to Know

November 29, 2023: Update to Post via The Financial Crimes Enforcement Network

The Financial Crimes Enforcement Network (FinCEN) released an updated final rule on November 29, 2023. This update extends the deadline from 30 to 90 days for specific reporting companies to submit their inaugural Beneficial Ownership Information (BOI) reports to FinCEN.

Reporting companies formed or registered in 2024 are now provided a time frame of 90 calendar days from the point of receiving an actual or public notice concerning their formation or registration process to file their initial reports.

FinCEN will not start accepting BOI reports from reporting companies until the start of the new year—January 1, 2024. No reports are to be delivered to FinCEN prior to this date.

According to FinCEN Director Andrea Gacki, “This deadline extension will have significant benefits and will provide valuable extra time for company applicants and for reporting companies created or registered in 2024 to understand this new regulatory obligation and obtain the required information to file their BOI reports.”

October 26, 2023: Original Post

Beginning January 1, 2024, many companies created in or registered to do business in the United States will be required to report information about their beneficial owners to the Financial Crimes Enforcement Network. 

Overview of the Beneficial Ownership Information Reporting Rule

Introduced in September 2022, the new Beneficial Ownership Information (BOI) reporting rule under the Corporate Transparency Act (CTA) was introduced to combat the misuse of shell corporations for money laundering and other illicit financial activities. 

The rule mandates certain companies must report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). Starting January 1, 2024, businesses have to start abiding by this rule. BOI reports must be filed electronically using FinCEN’s secure filing system.

Companies that fail to report beneficial ownership information as required by FinCEN’s new rule potentially may face hefty penalties. Non-compliance could lead to financial penalties, legal action, or both.

When Does the BOI Report Need to be Filed

Reports will be accepted starting on January 1, 2024.

Reporting companies created or registered to do business before January 1, 2024, have until January 1, 2025 to file their initial BOI reports.

Reporting companies created or registered on or after January 1, 2024, will have 30 days after receiving notice of their company’s creation or registration to file their initial BOI reports.

Types of Companies Subject to the BOI Reporting Rule

A Reporting Company is defined as a domestic or foreign corporation, LLC, or similar entity registered to do business in any state/jurisdiction by filing a document with a secretary of state or equivalent state office. Foreign Reporting Companies include any legal entities formed under the laws of a foreign country that is registered to do business in any state within the United States.

What Entities Are Exempt from the BOI Reporting Rule

The reporting rule exempts 23 types of entities, most of which already are under substantial federal reporting requirements, such as public companies, financial institutions, securities brokers, insurance companies, venture capital fund advisers and other registered investment companies, among others. 

Moreover, ‘large operating companies,’ defined as employing more than 20 full-time employees in the U.S. with gross receipts exceeding $5 million, are exempt provided they meet the exact criteria. Tax-exempt entities, and wholly-owned subsidiaries of some exempt entities, and inactive entities are also exempt.

See FinCEN’s exempt entity list under C.2. list

What Information Needs to be Reported?

The Reporting Company is required to provide identification information, such as:

  • The full legal name and any trade name or DBA of the Reporting Company
  • A complete current address
  • The State, Tribal, or foreign jurisdiction of formation
  • The IRS Taxpayer Identification Number (TIN) of the Reporting Company

Additionally, for each beneficial owner and Company Applicant, the Reporting Company must provide the individual’s full legal name, date of birth, complete current address, a unique identifying number from an acceptable identification document, and copies of such documents.

FinCEN has issued the Small Entity Compliance Guide to help small businesses comply with the new BOI reporting rule.

Chart from Small Entity Compliance Guide
Chart from Small Entity Compliance Guide

How to Identify Beneficial Owners

A beneficial owner is any individual who holds substantial control over a company or owns or influences at least 25% of the ownership interests. ‘Substantial Control’ could take many forms, including being a senior officer, having the power to hire or fire certain officers or the majority of directors, or being a key decision-maker in the business.

In Conclusion

Small businesses should start preparing themselves to comply with the BOI reporting rule that becomes effective on January 1, 2024 and stay informed on the latest updates and guidelines provided by FinCEN to ensure compliance. Compliance is not just a regulatory requirement; it is a necessary step towards a more transparent and accountable financial landscape for your business.

The nature and severity of penalties for not filing or not complying will depend on the extent and nature of the non-compliance. It’s also worth noting that penalties may apply for reporting incorrect or incomplete information. Therefore, we strongly encourage you to be diligent with your information gathering and reporting efforts.

The Wendroff & Associates team is available to help provide guidance on navigating the evolving BOI reporting requirements. Use the FREE CONSULT button below to schedule a convenient time to discuss your needs with one of our experts.

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