Beneficial ownership reporting deadline is fast approaching

Barring a federal court intervention, the filing deadline for all businesses created prior to 2024 that are required to file a beneficial ownership information (BOI) report with the Financial Crimes Enforcement Network (FinCEN) is Jan. 1, 2025. While an Arkansas federal judge has found the Corporate Transparency Act (CTA) to be unconstitutional and barred the enforcement of provisions requiring the filing of BOI reports, that decision only bars enforcement against members of the National Small Business Association, which filed the lawsuit.

The Arkansas decision has been appealed to the U.S. Court of Appeals for the 11th Circuit. Some have expected that the appeals court would find that FinCEN has no power to enforce the CTA’s BOI provisions before the reports are due (or at least postpone reporting), but the court has given no indication that it will act before the deadline. As a result, unless they have otherwise been exempted from the reporting requirements by the Arkansas court decision, all businesses that are required to file a report under the CTA should plan on doing do so by Jan. 1, 2025. The civil penalty for reporting violations can be as high as $591 per day.

Who must file a report?

The CTA mandates that BOI reports must be filed with FinCEN by entities created by filing with a secretary of state or similar office in the U.S. This includes S corporations, C corporations and limited liability companies. Sole proprietorships and general partnerships are usually not required to file BOI reports unless they were created by filing a document with the secretary of state or similar office. Foreign companies formed under the laws of other countries must file if they registered to do business in the U.S. by filing with a secretary of state or similar office.

All reporting businesses that were created or registered to do business prior to Jan. 1, 2024, must file a BOI report with FinCEN by Jan. 1, 2025. After the initial report has been filed, there is no annual reporting requirement. Reporting companies need only file additional BOI reports when the included information needs to be updated or corrected.

Companies that were created or registered during 2024 must file their initial BOI report with FinCEN within 90 calendar days of receiving actual or public notice that their registration is effective. Those reporting companies that were created or registered on or after Jan. 1, 2025, will have 30 days to file their report after receiving actual or public notice that their creation or registration is effective.

If you have any questions about which companies are required to file a report, FinCEN maintains an extensive list of FAQs that answer questions related to the filing requirements, including the situations in which entities like homeowners’ associations, nonprofits and business trusts must file.

What must be reported?

Companies that are subject to the CTA’s BOI reporting requirements must identify their beneficial owners whose information must be reported. Generally, reporting companies must provide the following information about their beneficial owner:

• Name
• Date of birth
• Address
• Identifying number and issuer from a U.S. driver’s license, U.S. passport or an identification document issued by a state, local government or Native American tribe. If the beneficial owner has none of those documents, an unexpired foreign passport may be used.

The reporting company must also provide information about itself, such as its name and address.

Who is a beneficial owner?

A beneficial owner must be an individual. The beneficial owner who must be named in a BOI report is a person who either directly or indirectly:

• Exercises substantial control over the reporting company
• Owners or controls at least 25% of the reporting company’s ownership interests

Legal entities, such as trusts or corporations, can’t be beneficial owners. However, in specific circumstances, information about an entity may be reported in lieu of information about the beneficial owner.

Beware of BOI reporting scams

FinCEN has issued an alert to notify the public that it has received reports of fraudulent attempts to solicit information from individuals and entities that may be subject to BOI reporting requirements. Reported scams include:

• Correspondence seeking payment. There are no fees for filing a BOI report directly with FinCEN and the agency does not send out correspondence requesting payment for filing a report.
• Emails or letters asking the recipient to click on a URL or scan a QR code. FinCEN is warning individuals that they should not click on any suspicious links or attachments on websites or unsolicited mailings.
• Correspondence referencing “Form 4022” or an important compliance notice. FinCEN does not have a Form 4022, and any forms included in this correspondence are fraudulent and should not be completed.
• Correspondence or other documents that reference the “U.S. Business Regulations Dept.” There is no government entity with that name.

Looking for more information on BOI reporting?

If you still have questions about BOI reporting, check out our on-demand webinar on the topic. The webinar is free to NATP’s premium members.