On January 1, 2024, the US government began enforcing new rules requiring certain US business entities to report “Beneficial Ownership Information” (BOI) – information regarding the identities of the individuals who ultimately own and control the business entities – in order to limit the ability of criminal actors to establish and operate shell companies in the US. As a result, many legitimate US business entities are now required to file BOI reports with the Financial Crimes Enforcement Network (FinCEN). The BOI reporting regime represents a radical departure from past practice in the US and creates a host of new questions for individuals who own and control business entities, some of which are answered below.
Who must file a BOI report?
- Every corporation, partnership, limited liability company and other business entity registered to do business in the US, with the exceptions of publicly traded companies, banks, financial institutions and charities and related organizations, among certain others.
- This includes business entities that are not actually operating businesses, like holding companies and entities formed in connection with estate planning.
- Willfully reporting or attempting to report false or fraudulent BOI, or willfully failing to report or make updates to reported BOI shall be punishable by a civil penalty of $500 per day that the violation remains uncorrected, or criminal penalties, including imprisonment for up to two years and/or a fine of up to $10,000.
What information must a BOI Report contain?
- A business entity required to file a BOI report must provide information identifying the business entity itself, as well as information identifying its “beneficial owners.”
- A beneficial owner of a business entity is an individual
- who exercises substantial control over the business entity; and/or
- owns more than 25% of the ownership interests in the entity.
When must a business entity file a BOI Report?
- Depending upon the date of formation, business entities are required to file BOI reports within the following time frames:
- Entities formed before January 1, 2024, must file a BOI report before January 1, 2025;
- Entities formed after January 1, 2024, must file a BOI report within 90 days of formation; and
- Entities formed after January 1, 2025, must file a BOI report within 30 days of formation.
- Business entities are also obligated to update their BOI reports within 30 days of a change of BOI; e.g., if an interest in a business entity is transferred by the owner in connection with his or her estate planning.
Where are BOI Reports filed?
BOI reports are filed online with FinCEN, a bureau of the US Department of Treasury, where they may be accessed by federal, state and local officials, among certain others, in accordance with approved processes.
Why are BOI reports required?
To strengthen the integrity of the US financial system by making it harder for illicit actors to use shell companies to launder money or hide assets.
How can WCN help you with BOI reporting?
The BOI reporting regime represents a drastic change with respect to the obligation of small and mid-sized business entities to report BOI.
WCN is available to help business entities and beneficial owners ensure that they are compliant. This may include
- Determining whether a business is required to file BOI reports or is exempted;
- Determining what information must be included when filing a BOI report; and/or
- Filing a BOI report with FinCEN.
For more information about BOI reporting requirements and other business related issues, contact our attorneys in the Business Law practice at Wilchins Cosentino & Novins. With decades of experience from formation to succession planning, our business law attorneys offer advice and counsel for you and your business to be set up for success.
This article is not legal advice and should not be taken as such or relied upon as legal advice.