Understanding Beneficial Ownership Information Reporting

In an effort to increase transparency and curb financial crimes, the United States is implementing new reporting requirements for businesses. These businesses will need to report detailed information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a division of the Department of the Treasury.

This blog will guide you through who needs to file, the specific reporting requirements, and the potential consequences of non-compliance.

Introduction to Beneficial Ownership Reporting

In 2021, Congress passed the Corporate Transparency Act on a bipartisan basis.

Effective January 1, 2024, many closely-held businesses in the United States will be required to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a branch of the Department of the Treasury. This new regulation is part of a broader effort to increase transparency in business operations and to combat financial crimes such as money laundering, fraud, and terrorist financing.

It’s important for business owners to be aware and ensure they stay compliant. (Please note that BOI is not related to tax filing. See more in frequently asked questions)

What is a BOI Report?

Put simply, a Beneficial Ownership Information Report, or BOI, refers to a filing that identifies individuals who directly or indirectly own or control a company. These filings need to be reported to the Financial Crimes Enforcement Network (FinCEN), a branch of the Department of the Treasury. Understanding who qualifies as a beneficial owner is crucial, as it includes anyone who exercises substantial control over the company or owns 25% or more of the company’s equity interests.

Importance of the Corporate Transparency Act in Establishing BOI Reporting Requirements

The US Corporate Transparency Act was introduced to help tackle illegal activities by enforcing transparency of company ownership, including corporations and limited liability companies. Illegal activities that are of major concern include shell companies, fraud, money laundering, and terrorism.

With FinCEN leading BOI reporting, they play a key role in making sure businesses follow the rules and stay transparent. This helps keep the financial system honest and protects against illegal activities, benefiting not only businesses but also financial institutions and the overall economy."

Who must file

Companies required to report are called reporting companies.  This includes: 

1. Corporations, LLCs, or any other business entity created by the filing of a document with the secretary of state or similar office under state law.
2. Foreign companies that were registered to do business in any US state.

Who does not have to file

There are 23 types of entities that are exempt from filing.  These entities include publicly traded companies, nonprofits, and certain large operating companies. 

A full list of the exemptions:

1. Securities reporting issuer
2. Governmental authority
3. Bank
4. Credit union
5. Depository institution holding company
6. Money services business
7. Broker or dealer in securities
8. Securities exchange or clearing agency
9. Other Exchange Act registered entity
10. Investment company or investment adviser
11. Venture capital fund adviser
12. Insurance company
13. State-licensed insurance producer
14. Commodity Exchange Act registered entity
15. Accounting firm
16. Public utility
17. Financial market utility
18. Pooled investment vehicle
19. Tax-exempt entity
20. Entity assisting a tax-exempt entity
21. Large operating company
22. Subsidiary of certain exempt entities
23. Inactive entity

When to file your initial BOI report

As of January 1, 2024, reports have been accepted on the FinCEN website. The stipulations for filing are as follows:

• If your corporation or llc was created or registered prior to January 1, 2024, you will have until January 1, 2025, to report BOI. 
• If your corporation or llc was created or registered on or after January 1, 2024, and before January 1, 2025, you must report BOI within 90 calendar days after receiving actual or public notice that your company’s creation or registration is effective, whichever is earlier.
• If your corporation or llc was created or registered on or after January 1, 2025, you must file BOI within 30 calendar days after receiving actual or public notice that its creation or registration is effective.
• Any updates or corrections to beneficial ownership information that you previously filed with FinCEN must be submitted within 30 days.

What information is needed

There are a few reporting obligations to be aware of. They include:

1. Reporting Company Requirements  
   • Full legal name
   • Any DBA names
   • Street Address
   • Federal Employer Identification Number
     • The Internal Revenue Service (IRS) offers a free online application for an Employer Identification Number (EIN), a type of TIN, which is provided immediately upon submission of the application.
   • Jurisdiction where it was created

2. Beneficial Ownership Reporting Requirements – any individual who, directly or indirectly Exercises substantial control over the reporting corporation
   • Senior Officer
   • Has authority to appoint or remove certain officers or a majority of directors
   • Is an important decision-maker, or
   • Has ANY other form of substantial control over the reporting company, OR
   • Owns or controls at least 25% of the ownership interests of the reporting corporation:
     • Equity, stock or voting rights
     • Capital or profit interest
     • Convertible instruments
     • Options or other non-binding privileges to buy or sell any of the foregoing
     • ANY other instrument, contract, etc. used to establish ownership.
3. Company Applicants Requirements – Each reporting company formed after January 1, 2024 that is required to report company applicants will have to identify and report to FinCEN at least one company applicant, and at most two.  All company applicants must be individuals.  Companies or legal entities cannot be company applicants.

Information reported for Company Applicants and/or Beneficial Owners includes:

• Full Legal Name
• Date of Birth
• Complete current address (residential)
• Unique identifying number and issuing jurisdiction form, and image of one of the following non-expired documents:
  • US passport
  • State Driver’s license
  • Other identification document issued by the state
  • Foreign Passport

What if I do not file?

The willful failure to report complete or updated beneficial ownership information to FinCEN may result in a civil penalties up to $500 for each day that the violation continues or criminal penalties including imprisonment and/or a fine of up to $10,000.

Is There a Fee for Filing a BOI Report?

There is NO fee to file BOI directly with FinCEN. However, it is recommended to opt for a service to handle it for you. Reasons why:

• Speed: Most services can streamline the report process and get you compliant in just a few minutes.
• Track Status: Quickly check if your BOI Report has been processed.
• Receive a Filing Analysis: Have peace of mind once your BOI is complete, plus, ongoing monitoring services.

BOI Report Service Recommendation

Zeni is partnered with FileForms! Their pricing includes:

1. One time filing, $179: Best for companies not anticipating any changes to ownership structure any time soon
2. Unlimited Filing, $199 per year: Best for companies anticipating changes and the need to report BOI updates to FinCEN in the next year
3. Legal Expert Add On, $499 per entity: Get legal advice and a signed opinion from a licensed attorney or CPA with expertise in BOI policy and procedures

Additional information can be found here.

Compliance is priority #1

By doing your due diligence with understanding who needs to file for BOI, what information is required, and when the deadlines are, you are able to avoid penalties. There's no fee to file directly with FinCEN, but using a service can make the process faster and easier. These services can help you file quickly, track the status of your report, and provide ongoing support.

Partnering with a reliable service like Zeni and FileForms can simplify the process and ensure you're compliant with the new rules. Staying on top of these requirements not only keeps your business in good standing but also contributes to a more transparent business environment.

For more information, check out fincen.gov/boi

FAQ’s

Who can access BOI Reports?

FinCEN will permit Federal, State, local, and Tribal officials, as well as certain foreign officials who submit a request through a U.S. Federal government agency, to obtain beneficial ownership information for authorized activities related to national security, intelligence, and law enforcement.

Is a BOI Report a tax related filing?

Short answer: NO!

People might think a BOI Report is tax-related because it involves reporting detailed information about a company's ownership and financial matters to a government agency.

It's important to clarify that while both involve reporting to the government, BOI reporting is specifically about ownership transparency and not related to tax obligations.

What should I do if previously reported information changes?

If there is any change to the required information about your company, such as a new beneficial ownership, your company must file an updated report no later than 30 days after the date of the change. This is a reporting rule.

Does Zeni have partnerships with Beneficial ownership reporting companies?

Yes, with FileForms! They are a trusted partner for filing regulatory forms and reports. Their platform was built by industry thought leaders with extensive regulatory and financial technology experience to assure they convert complex filing requirements into a streamlined, compliant, white-glove, client experience.