BOI Report Mandate for LLCs and Corporations

Filing Requirements for Businesses: A Comprehensive Guide

Under the new regulations, companies must report information about their beneficial owners to FinCEN. The requirements for who must file a beneficial ownership information report depend on whether the company is classified as a domestic or foreign reporting company.

Reporting Companies

• Domestic Reporting Company: A domestic reporting company includes corporations, LLCs, or any other business entities that are created by filing a registration document with the Secretary of State's office or a similar office under the laws of a state or an Indian tribe. For instance, if you have a corporation or LLC registered in California, it is a domestic reporting company.
• Foreign Reporting Company: A foreign reporting company is a corporation, LLC, or other entity formed under the laws of a foreign country but registered to do business in the U.S. or under a tribal jurisdiction by filing a document with the Secretary of State or a similar office. For example, if a corporation from another country registers to do business in California, it is considered a foreign reporting company.

Filing Requirements

Domestic Reporting Companies:

• Must file beneficial ownership information reports with FinCEN.

Foreign Reporting Companies:

• When a foreign company registers to do business in a U.S. state, it must file beneficial ownership information reports in each state where it is registered.

In summary, any corporation or LLC created in a U.S. state or an Indian tribe, as well as those formed under foreign laws but registered to do business in the U.S., must file beneficial ownership information reports to comply with FinCEN's regulations.

Exempt Entities from Beneficial Ownership Information Reporting

Certain business entities are exempt from filing a beneficial ownership information (BOI) report with FinCEN. Here are the main categories of these exemptions:

Sole Proprietorships and General Partnerships:

• Sole Proprietorships: These are businesses owned and run by one individual, with no distinction between the owner and the business. Since they are not registered legal business entities, they do not file documents with the Secretary of State’s office.
• General Partnerships:

Publicly Traded Companies:

Non-Profit Organizations:

Large Operating Companies:

Additional Exempt Entities: There are 23 specific types of entities that are exempt from BOI reporting. These exemptions cover various organizations that are subject to other forms of governmental oversight and reporting.

Why These Entities Are Exempt

The exemptions are in place because these entities are already subject to other reporting requirements that provide the government with the necessary information to identify and monitor their beneficial owners. This avoids redundancy and focuses the BOI reporting requirements on entities where beneficial ownership transparency is most needed.

Information Required for BOI Report

The Beneficial Ownership Information (BOI) report collects detailed information about both the reporting company and its beneficial owners and company applicants. Below is a breakdown of the required information:

Reporting Company Information:

• Full Legal Name: The complete legal name of the entity.
• DBAs or Trade Names: Any "Doing Business As" (DBA) names or trade names associated with the legal entity.
• Principal U.S. Business Address: The main business address within the United States.
• Formation Jurisdiction: The state or tribal jurisdiction where the entity was formed.
• IRS Taxpayer Identification Number: This could be an Employer Identification Number (EIN), Social Security Number (SSN), or Individual Taxpayer Identification Number (ITIN).

Beneficial Owners and Company Applicants Information:

• Full Legal Name: Complete legal name of the beneficial owner or company applicant.
• Date of Birth: The birthdate of the individual.
• Residential Street Address: The individual’s full residential address.
• Personal Identification Number: This can include:U.S. passport numberState-issued driver’s license numberID document number issued by state, local government, or tribal authoritiesFor non-U.S. residents or citizens, a foreign passport number.

FinCEN Identifiers

A FinCEN identifier is a unique ID number issued by FinCEN to an individual or a reporting company upon request. It can be used in the BOI report in place of other identifying information.

Key Points about FinCEN Identifiers:

• How to Obtain: Request a FinCEN identifier through the FinCEN website via an electronic application.
• Use in BOI Report: If a beneficial owner or company applicant has a FinCEN identifier, the reporting company can use this identifier in the report instead of providing detailed personal information.
• Optional: Obtaining a FinCEN identifier is not mandatory. Companies and individuals are not required to get this identifier to file a BOI report.
• Advantages: Using a FinCEN identifier can potentially expedite the reporting process. However, incomplete applications may still require additional information from FinCEN.

Conclusion

While filing a BOI report, it is important to gather all the necessary information for both the reporting company and the beneficial owners or company applicants. Utilizing a FinCEN identifier can streamline the process, but it remains optional and does not exempt the filer from providing complete and accurate information.

Key Points on Beneficial Ownership Information Reports

Public Availability:

• Confidentiality: Beneficial Ownership Information (BOI) Reports are not made public. They are used internally by the Financial Crimes Enforcement Network (FinCEN) and are not accessible to the general public.

Filing Frequency:

• Changes Only: A new BOI report is only required when there are changes to the beneficial owners of the company. There is no need to resubmit the report annually unless there are updates or changes in ownership or control.

Exempt Companies:

• Filing Unnecessary: Exempt companies, such as certain publicly traded companies, non-profits, and large operating companies, do not need to file BOI reports. Filing unnecessarily reduces privacy without providing additional benefits.

Beneficial Owners vs. Company Applicants:

• Beneficial Owner: An individual with substantial control or at least a 25% ownership interest in the business.
• Company Applicant: The person who registered the business. The Company Applicant must be included in the BOI report for entities formed on or after January 1, 2024.

Homeowners Associations:

• Reporting Requirements: For entities like Homeowners Associations, anyone who exercises substantial control or owns/controls more than 25% of the ownership interests needs to be reported.

Complex Ownership Structures:

• Example Scenario: If Company A is equally owned by Corporation B and Corporation C, and both corporations are subsequently owned by an individual: Reporting Requirement: Company A must file a BOI report.Beneficial Owners: The individual who owns Corporations B and C is the beneficial owner of Company A. General Rule: Beneficial owners are individuals unless the entity is solely owned by an exempt entity.

Summary

The BOI reporting requirements are designed to provide transparency and prevent financial crimes without imposing unnecessary burdens on exempt entities. Understanding who needs to file and when, along with the differences between beneficial owners and company applicants, is crucial for compliance. If there are any further questions or specific scenarios needing clarification, additional resources may be helpful.

When Are Title Reports Due?

Existing Companies:

• An existing company is defined as one that was formed before January 1, 2024.
• Existing companies must file their report after January 1, 2024, and before January 1, 2025.

New Companies:

• Any reporting company created or registered on or after January 1, 2024, must file its initial BOI report within 90 days of its formation.
• The initial ruling required filing within 30 days, but this was extended to 90 days as of November 30, 2023.
• The 90-day window begins either when the company receives notice from the state that its registration is effective or after a secretary of state (or similar office) provides public notice of the reporting company’s registration, whichever is earlier.
• Entities created or registered on or after January 1, 2025, will continue to have 30 calendar days to file.

Penalties for Not Reporting

• A company could face civil penalties of up to $500 per day for each day it fails to provide complete and accurate BOI information beyond the report's due date.
• Willfully failing to provide, or attempting to provide false or fraudulent beneficial ownership information, could result in criminal penalties, including imprisonment for up to two years and/or a fine of up to $10,000.

Acknowledgment

We would like to extend our gratitude to Nellie Akalp, CEO of CorpNet, for her insights and contributions to this article.