January 1, 2024 marked the beginning of the requirement for many businesses in the United States to report Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury. This obligation stems from the Corporate Transparency Act (CTA), which aims to increase transparency regarding business ownership and combat illicit activities such as money laundering and fraud. If you own a business in the U.S. or abroad with operations in the country, it is crucial to understand what beneficial ownership information is, how it affects your business, and the steps you need to take to comply with the requirements before the deadlines.
5 Key Aspects:
1. What is Beneficial Ownership Information (BOI)?
Beneficial Ownership Information refers to the data of individuals who directly or indirectly own or control a company. This information is essential for identifying the individuals behind a business, which is key to reducing the risk of fraud, money laundering, and other financial crimes. FinCEN has established the requirement for businesses to disclose who their beneficial owners are—those individuals who exercise significant control or own at least 25% of the company.
2. Who Must Report Beneficial Ownership Information?
Under the CTA, most businesses in the U.S., including corporations, LLCs, and foreign companies operating in the country, are required to report their BOI. However, certain entities are exempt from this requirement, such as publicly traded companies, banks, insurance companies, and other entities that are already subject to strict regulatory reporting. For companies established before January 1, 2024, the deadline to file the initial report is January 1, 2025. Businesses created in 2024 must file within 90 days, and those registering after January 1, 2025, have only 30 days to submit their report.
3. What Information is Required for the Beneficial Ownership Report?
Each company must provide basic information about itself and its beneficial owners. For the company, the required details include the legal name, trade names, address, jurisdiction of registration, and taxpayer identification number. For the beneficial owners, the required information includes their full name, date of birth, residential address, and an identifying number from an official document, such as a passport or driver’s license.
4. What Are the Consequences of Failing to Report on Time?
Failure to comply with the obligation to file BOI can result in severe penalties. Civil fines can reach up to $500 for each day of delay, and criminal penalties can include fines up to $10,000 and up to two years in prison. Additionally, if the information reported is incorrect or incomplete, businesses may face both civil and criminal charges. It is essential to submit the information accurately within the stipulated deadline to avoid these penalties.
5. How to Prepare and File BOI?
FinCEN has developed an electronic filing system (BOI E-Filing) to facilitate the submission of the information. This system is available on the FinCEN website, where businesses must upload their beneficial ownership reports. Any authorized person, such as an employee, owner, or external service provider, can file the report on behalf of the company. It is vital for businesses to prepare in advance and gather all the required information to avoid issues during the filing process.
