There is a new reporting requirement beginning January 1st, 2024, and most businesses are now required to report. What is the beneficial ownership information report, or BOI? It is a reporting requirement that came from a law passed by Congress in 2021, that will basically list who has ownership both directly and indirectly in most businesses. What this law has done is it basically prevents people from hiding their ownership. The financial crimes enforcement network, otherwise known as FinCEN, is the department of the US Government that is responsible for enforcement and monitoring these reports.
While most businesses are required to report, there are a few types of businesses that are exempt from having to complete the BOI report. Those that are exempt include foreign businesses that are not registered to do business in and US State or jurisdiction, or any company that was created and did not file any document with the secretary of state or any similar office under the law of a state or Indian tribe. A few other businesses that are excluded, include banks, credit unions, accounting firms, public utilities, insurance companies, investment companies, tax-exempt entities & inactive entities. For a full list of entities that are excluded from having to report, please visit https://www.fincen.gov/boi
So now that you qualify, you may be wondering what and how do you report. All reporting companies have to report its beneficial owners. This is anyone who directly or indirectly owns or controls 25% or more of the ownership interests or anyone who has substantial control over the company. Some examples of ownership interests are equity, stock, capital and profit interests, options & privileges and convertible instruments. Exceptions to beneficial owners are minor children (parents must instead be reported), nominees, custodians or agents of another individual, employees if they are not a senior officer and do not have substantial control over their job, creditors and inheritors who’s only interest is in the future or to satisfy a loan or debt.
If your business was created on or after January 1st 2024, you will have 90 days to complete your report once registered. If your business was created on or after January 1st, 2025, you will have 30 days to complete your report once registered. In addition, you will have to report company applicants. Businesses created before January 1st, 2024, do not have to report company applicants. The company applicants are the people who were responsible or directly filed the documents with the secretary of state or similar office that created the company that is reporting.
For businesses created before January 1st 2024 that must report, it must be completed before January 1st, 2025. There is no cost to report, but failure to report can result in civil and criminal penalties. The report can only be completed through the FinCEN’s online filing system. The system is still being developed, and once released the FinCEN will release instructions and guidance on how to use this system on their website https://www.fincen.gov/boi.
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