Beneficial Ownership Information (BOI) Reporting – Everything You Need To Know

By Michael Malc?

?

In 2021, Congress passed the Corporate Transparency Act, creating a new reporting requirement for beneficial owners of certain entities to make it harder for bad actors to hide or benefit through shell companies. Beneficial ownership information refers to the identifying information about the individuals who directly or indirectly own or control an entity. FinCEN, the office responsible for other foreign, non-U.S. related filings such as FBAR filings, will also be responsible for the BOI filings. Under this law, FinCEN would allow Federal, State, and Local government officials access to the filings for matters of national security, intelligence, and law enforcement. There are circumstances that financial institutions can also access this information, which would enable their financial regulators the access as well.?

?

There are two important filing dates to be aware of:?

• Companies that were created or registered to do business before January 1, 2024, have until January 1, 2025, to file their BOI report.?
• Companies that were created or registered to do business on or after January 1, 2024, have only 30 days to file their initial BOI report. The 30-day countdown begins from the time the company receives an actual notice that its creation/registration is effective by either the office of the secretary of state or another similar office.???

??

Companies that are required to report are called “reporting companies”:?

• Domestic reporting companies are entities created by filing a document with a secretary of state or similar office in the United States.?
• Foreign reporting companies are entities formed under the laws of a foreign country that have registered to do business in the United States by filing with a secretary of state or similar office.?

??

The general rule of thumb is that any company that has had to register with a secretary of state, is required to file a BOI Report. Statutory trusts, business trusts, and foundations may be subject to this reporting requirement if they’ve had to register with the secretary of state or similar office.?

?

There are 23 types of entities that are exempt from filing a BOI report, and include many nonprofits, banks, and brokers/dealers in securities, accounting firms, and inactive entities. See FinCEN’s “Small Entity Compliance Guide” for the full list and additional information to determine whether a company meets an exemption.? ??

?

A?beneficial owner?is an individual who either directly or indirectly exercises?substantial control?over the reporting company or owns or controls at least 25% of the reporting company’s ownership interests.???

?

Substantial control is defined in one of the following four ways. Should a beneficial owner fall into any one of the four categories, they will have a reporting requirement unless the company has an exemption.?

• The individual is a “senior/executive/chief” officer or performs a similar function.?
• The individual has the authority to appoint or remove certain officers or a majority of the directors.? ??
• The individual is an important decision-maker for the reporting company in the areas of business, finances, or structure.?
• The individual has any other form of substantial control as defined further in FinCEN’s “Small Entity Compliance Guide”.?

?

The information that will be reported on the BOI Report will be comprised of information on the reporting company itself and the beneficial owners.???

?

For the Reporting Companies:?

• The legal name and/or trade names or “DBA” names.?
• The current street address of its principal place of business if that address is in the United States; if the principal place of business is outside of the U.S., then the company would list the address from which it does business in the U.S.??
• Its jurisdiction of formation or registration.?
• Its Taxpayer Identification Number or foreign equivalent if issued by a foreign (non-U.S.) jurisdiction.?
• Whether the filing is an initial report or a correction/update.?
• Information as it regards the entity’s “company applicant” if that entity was created or registered after January 1, 2024. The company applicant is the person or persons (up to two people) that directly files the document that creates or registers the company. The company applicant may even be someone the company no longer has a relationship with (i.e. accountant or lawyer) but is still required to list their information. The information needed for a company applicant is the individual’s name, date of birth, address (either personal or business), and an identifying number from an unexpired acceptable identification document, such as a passport or driver’s license. A copy of the source of the identification number must also be submitted with the filing.??

For the Beneficial Owners:?

• The individual’s name.?
• The individual’s date of birth.?
• The individual’s residential address.?
• An identifying number from an unexpired, acceptable identification document, such as a passport or driver’s license. A copy of the source of the identification number must also be submitted with the filing.??

Other Information:?

• This filing is not done on an annual basis; rather, companies must fill out and file an initial report and only file additional reports should the BOI change and need to be updated on the report.?
• A parent company cannot fill out one BOI report on behalf of itself and its subsidiaries. Each qualifying company that isn’t exempt must file its own report.?
• If there is any change to the required information about the company or its beneficial owners, an updated BOI report must be filed within 30 days after the change occurs. Examples of when an updated report would be necessary, are if the company is registering a new business name, if a new CEO has been appointed, or if the personal information of a beneficial owner has changed. An updated BOI report is not necessary for any changes to previously reported company applicants.?
• Since this is a new requirement, FinCEN is allowing corrections for mistakes or omissions from the initial report to be made within 90 days of the deadline. Failure to fix the mistakes or even file altogether can result in both civil and criminal penalties.? ???

?

As with all new filing requirements, there will most likely be changes and updates to what and when BOI reports need to be reported. Please consult with your financial adviser, tax accountant, or legal representative to determine what filing requirements you and/or your business may have.?

?

All information has been summarized from FinCEN's BOI FAQ:?https://www.fincen.gov/boi-faqs?

Gerber Kawasaki Wealth & Investment Management is an investment advisor located in California. Gerber Kawasaki Wealth & Investment Management is registered with the Securities and Exchange Commission (SEC). Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Gerber Kawasaki only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Gerber Kawasaki Wealth & Investment Management 's current written disclosure brochure filed with the SEC which discusses, among other things, Gerber Kawasaki Wealth & Investment Management's business practices, services and fees, is available through the SEC's website at: https://www.adviserinfo.sec.gov .?

Michael Malc is a Director of Tax of Santa Monica, California-based Gerber Kawasaki Inc., an SEC-registered investment firm with approximately ~$2.3B billion in assets under management as of 09/30/23. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss. Readers shouldn't buy any investment without doing their research to determine if the investments are suitable for their situation. “All investments involve risk and one should consult a financial advisor before making any investments. Past performance is not indicative of future results."?