A Guide For BOI Reporting: Who Qualifies As A Beneficial Owner Of A Business?

In 2021, Congress passed the Corporate Transparency Act requiring businesses to report their beneficial owners starting January 1, 2024. It is estimated that 32 million businesses in the USA will be affected.

The Beneficial Ownership Information Report will be required from most businesses, large and small with a few narrow exemptions. Each report lays out detailed personal information about each beneficial owner in a company and is sent to the Financial Crimes Enforcement Network (FinCEN). The reasons for this are admirable but cause new headaches for business owners.

Scales of justice and a gavel on a desk, indicating legal aspects of the Corporate Transparency Act

The Reasons Behind Reporting Beneficial Ownership

The Corporate Transparency Act was passed to make it harder and put an end to money laundering, tax fraud, financing terrorism, and other illegal acts. The people who are doing these illicit activities make themselves hard to find by money laundering through LLCs, corporations, or other similar entities because no information is required on any beneficial owners.

To bring more transparency, starting in 2024, both domestic companies registered in the US and foreign companies that have registered to do business with the US will be required to report every beneficial owner and their personal information to FinCEN.

Types of Reporting Companies that Must Report Beneficial Ownership

The list of businesses required to report is long and the list of exemptions is very short. Reporting companies include:

  • Limited Liability Companies (LLCs) registered in the US
  • Corporations (including S and C) registered in the US
  • Foreign LLCs registered to do business with the US
  • Foreign corporations registered to do business with the US

Twenty-three different categories are exempt from having to report. Most of these companies, however, already were required to report beneficial ownership information. These exemptions include financial institutions, Security brokers and dealers, public utilities, tax-exempt organizations, insurance companies, inactive entities, and a few others.

What Constitutes Beneficial Ownership?

A beneficial owner is someone who exercises substantial control or owns/controls at least 25% of a company either directly or indirectly. However, these terms can be somewhat confusing so FinCEN puts clarity to what “substantial control” entails.

  • A senior officer (CFO, CEO, COO, etc)
  • Anyone with authority to appoint or remove officers or directors
  • An individual who makes important decisions in the company

Some companies may wonder what “important decisions” give a person substantial control. They can include decisions about finances, the company’s business, and the company’s structure. This does not include accountants and lawyers who may help your business make important decisions. There are exemptions for these cases.

Who Receives Your Beneficial Ownership Information?

Reporting companies must send in detailed business information including the company’s legal name, legal address, jurisdiction of registration, taxpayer ID number, and any trade names. Additionally, they will send in their Beneficial owner’s information which includes the individual’s name, date of birth, address, and a copy of a legal ID.

Due to the very personal nature of the information, it is natural to wonder who will receive and use the information. Under The Corporate Transparency Act, the information is not public, but several groups will have free access or authorized access to your information. However, their access is limited to national security, intelligence, and law enforcement situations.

  • Federal, state, local, and tribal law enforcement officials
  • Foreign officials who submit a request
  • Financial institutions
  • The US Department of Treasury

Rest assured, the information is secure and anyone who is authorized access will be watched closely by FinCEN to ensure the information is only used for the authorized purpose.

How to Know When Your Company Must Report Beneficial Ownership Information

These new reporting requirements can seem daunting, especially as the consequences for willfully not reporting are hefty fines and potentially jail time. That said, how will a business become aware that it is time to report? The good news is, that FinCEN has poured many resources into ensuring the education of this new requirement.

The other good news is that if your company was created or registered before January 1, 2024, you have until January 1, 2025, to file the BOI report, giving your company ample time to learn, understand, and complete the form. Companies created on or after January 1, 2024, will have 90 days after receiving notice of their registration to report.

Contact Our Top-Rated Tax Attorneys Today

For more detailed information on the new Beneficial Ownership Information Report or if you are struggling with complex tax litigation, feel free to reach out to Silver Law, PLC. We have experience in tax audit representation, innocent spouse relief, state tax disputes, and many other tax-related challenges.

For successful disputes and top-notch outcomes, contact us today!

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