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August 19, 2024
Has Your Company Reported Yet? Fincen Beneficial Ownership Reporting Deadline is January 1, 2025
By: Henry T. Chou, Esq.
Under the Corporate Transparency Act (CTA), all companies created in the United States must submit a beneficial ownership information (BOI) report to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), unless one of 23 exceptions applies. Companies formed before January 1, 2024 must submit a BOI report to FinCEN before January 1, 2025. Companies formed in 2024 must submit their BOI reports within 90 days and companies formed in 2025 or later must submit their BOI reports within 30 days of formation. A person who willfully violates the BOI reporting requirements may be subject to civil or criminal penalties of up to $10,000 and up to two years in prison.
DOES YOUR COMPANY NEED TO REPORT?
The CTA is applicable to all non-public U.S. companies that registered with a secretary of state or tribal-level office to create the company. There are no exceptions for active small businesses or exceptions for sole-owner pass-through entities. Even the smallest companies must comply because the purpose of the CTA is to create transparency for small, closely held private companies that can be used to hide identities for improper reasons.
The CTA includes 23 exemptions, mostly for publicly-traded and large companies. Some of the key exempted categories are:
- Large operating companies, defined as companies that employ more than 20 full-time employees in the US, has more than $5,000,000 in gross receipts or sales in the US, and has an operating presence at a physical office within the US.
- Public companies.
- Certain types of regulated entities, such as insurance companies, banks and credit unions, brokers or dealers in securities, and money services businesses.
- Companies involved in private equity and venture capital.
- Subsidiaries of certain exempt entities.
Under its BOI rule, FinCEN defines a beneficial owner as anyone who exercises substantial control over or directly or indirectly owns or controls at least 25% of the ownership interests of a company registered to do business in the United States. Additionally, any “senior officer” of a company, e.g., a president, chief financial officer, general counsel, chief executive officer, chief operating officer or any other officer, regardless of official title, who performs a similar function, is also considered a beneficial owner.
WHAT TO REPORT?
A reporting company must submit a BOI report to FinCEN that includes the following information:
- Company information, such as full legal name (and any trade names), address, jurisdiction of formation, and taxpayer identification number.
- Beneficial owner information, including the full legal name, date of birth, address, and the unique identifying number and image of a US passport, state driver’s license, or other eligible identification document for each individual identified as a beneficial owner.
- For companies created on or after January 1, 2024, information regarding the individual that filed the document forming the company, which is the same information required of beneficial owners.
The BOI registration website is publicly available at https://boiefiling.fincen.gov/fileboir. A 50-page small entity compliance guide is also available on FinCEN’s website. However, the BOI reporting requirements are complex and may require legal guidance. They involve not only legal interpretations of many definitions, exemptions, and other provisions under the CTA, but in many instances require legal interpretations under state, local or foreign law, as well as organization documents, ownership interests and other legal instruments. Hill Wallack LLP stands ready to assist its clients with their BOI reporting requirements.
For more information on how to comply with your company’s BOI reporting requirements, please contact Henry T. Chou, Esq. at hchou@hillwallack.com or 609-734-4447.
