December 2023


About Beneficial Ownership Reporting (BOI)

Beginning January 1, 2024, many companies must report information about their beneficial owners—individuals who ultimately own or control the company—to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.

To-Do List Before January 1, 2024

For existing entities, there is technically no immediate action required. January 1 signifies the rule's implementation, not a deadline. Instead, the reporting deadlines are as follows:
  • Businesses formed before January 1, 2024 have until January 1, 2025 to report beneficial owner information.
  • Businesses established after January 1, 2024,  but before January 1, 2025 will have 90 days to report beneficial owner information.
  • Businesses established after January 1, 2025 will have 30 days to report beneficial owner information.
FinCEN cannot accept reports before January 1, 2024, so there nothing to do now, right? Not exactly.

How and Why Business Owners Should Prepare Now

It is crucial for reporting companies to comply with this rule as penalties may be enforced for non-compliance. Therefore, we recommend business owners prepare sooner rather than later.

We've put together a short list of 4 action items for businesses to consider in the first half of the year.

Most corporations, LLCs, and other entities registered to do business in the United States are considered reporting companies, that is, they are required to comply with the new BOI reporting rule. For more information on entities required to report, visit the FinCEN BOI Website

There are, however, a list of twenty-three (23) entity types that are exempt from reporting. You can find the full list of exemptions in the BOI FAQ section of the FinCEN website.  
Once you have determined your business entity to be a reporting company, then it is essential to understand the requirements of the new rule and its rationale. 

Why This Requirement?
The Beneficial Ownership Information (BOI) Reporting rule arises from the Corporate Transparency Act (CTA) amendment to the Bank Secrecy Act (BSA). The BSA was enacted in 1970 to combat financial crimes such as money laundering, financing terrorism, human trafficking, drug trafficking, tax fraud, and others. 

The CTA, passed in 2021, is aimed at further strengthening U.S. national security and closing loopholes that have allowed financial criminals to exploit shell companies and other opaque ownership structures. 


What Do Businesses Need to File?
Reporting companies must identify themselves and report four pieces of information about each of it’s beneficial owners: name, birth date, address, and a copy of an acceptable form of identification. 

To do this, you must also understand who FinCEN considers as beneficial owners (see Step 3). 
According to FinCen, a beneficial owner is someone who either:
  1. Exercises substantial control (Senior Officer, Important Decision Maker, person with appointment or removal authority, and other substantial control) over a reporting company, or
  2. Owns or controls at least 25% of the ownership interest of a reporting company such as:
    • Equity, stock, or voting rights
    • Capital or profit interest
    • Convertible instruments
    • Option or privilege
    • Any other instrument, contract, arrangement, understanding, relationship, or mechanism used to establish ownership
There are exceptions to the above such as a beneficial owner being a minor child.  For step-by-step instructions and information about how to determine the beneficial owners of your business, check out Page 23 of the BOI Small Business Compliance Guide published by FinCEN.
It's important to determine who, what, where and when to ensure your business is compliant with the new rule.  Here are some key considerations:
  • Who will identify beneficial owners?
    This task requires an understanding of the rule along with knowledge of the ownership structure, which is often privileged information.

  • Who/How will you gather filing information?
    Consider the time needed for the task of gathering the required filing information from each beneficial owner (name, birth date, address, and a copy of an acceptable form of identification).

  • Who will be responsible for filing on your business entity's behalf?
    Will it be you, someone on your team, or even a third party advisor such as a CPA or other business advisor? 

  • How will ongoing updates to previously filed information be handled?
    Changes (or inaccuracies) to the information filed must be reported within 30 days of the change. Some examples of changes that require an updated BOI report include:
    • Registering a new DBA for the business entity
    • An owner that acquires more than 25%
    • Hiring or promotion of an employee with substantial control, such as a new C-level executive or senior officer
    • A reported owner's name changes due to marriage
    • The death of a beneficial owner
    • Changes to an existing beneficial owner's address

      Note: This list does not include all of the scenarios in which an updated BOI report will be required. Learn more at: https://www.fincen.gov/boi-faqs






We're Here to Help!

We hope you find this information valuable. This is only a summary of the filing rule and a recommendation of things you can do to ensure compliance. For more detailed and up-to-date information from FinCEN, please visit their website where they have posted many resources and tools to help businesses navigate this new requirement, including a Small Entity Compliance Guide, FAQ's, Quick Reference, and Videos.


Protect Your Information: There has already been fraudulent attempts to solicit information (phishing scams). Do not click on links, scan QR codes, or respond to these attempts. Instead, go directly to the FinCEN website to gather and submit information. Protect yourself by learning about how to spot phishing scams. 

 
 
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