Understanding The Importance of Beneficial Ownership Information Report Filing: A Comprehensive Guide

In today’s interconnected financial world, transparency and accountability are paramount.

The Beneficial Ownership Information Report (BOIR) is crucial in this framework.

Understanding the BOI filing process is essential for both businesses and individuals to ensure adherence to regulations and avoid legal risks.

In 2021, the Corporate Transparency Act (CTA) was passed by Congress as part of the Anti-Money Laundering Act.

This act mandates reporting Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN).

The primary goal of this legislation is to improve transparency and counter the exploitation of shell companies or comparable ownership arrangements for illegal financial benefits.

What Is The BOI Report?

The BOI report, short for Beneficial Ownership Information Report, is a new requirement under the federal Corporate Transparency Act (CTA).

This report details a business’s ownership structure, highlighting individuals with significant control.

It includes details like the names and personal information of those who own the company.

Reporting entities must submit this report to the Financial Crimes Enforcement Network (FinCEN), which operates under the U.S. Department of the Treasury.

Who Needs To Comply With The BOI Report?

To determine if your company qualifies as a “Reporting Company,” you need to assess whether it falls under the following criteria set by the Corporate Transparency Act (CTA):

Domestic Entities

Check if the business was established by filing paperwork with U.S. state authorities. This includes entities such as corporations, LLCs, and partnerships.

Foreign Entities

Determine if the businesses are set up outside the U.S. They must file paperwork with the U.S. state authorities to conduct their operations. 

If your company fits into either of these categories, it must report Beneficial Ownership Information to the FinCEN. 

Entities Exempt from Submitting BOI Reports

Under the Corporate Transparency Act, certain entities are exempt from the requirement to submit BOI reports. The exemptions typically include:

Exemption No.Exemption Short Title
1Securities reporting issuer
2Governmental authority
3Bank
4Credit union
5Depository institution holding company
6Money services business
7Broker or dealer in securities
8Securities exchange or clearing agency
9Other Exchange Act registered entity
10Investment company or investment adviser
11Venture capital fund adviser
12Insurance company
13State-licensed insurance producer
14Commodity Exchange Act registered entity
15Accounting firm
16Public utility
17Financial market utility
18Pooled investment vehicle
19Tax-exempt entity
20Entity assisting a tax-exempt entity
21Large operating company
22Subsidiary of certain exempt entities
23Inactive entity

Type of BOI Filing

1. Initial Report

The initial report is filed at the start stage when the company was created.

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If the company was registered on or after January 1, 2024, it must file its initial BOI report within 90 days after receiving the public notice.

If your company is registered after January 1, 2025, it must file its initial report within 30 days after receiving public notice. 

2. Updated Report

An updated report is filed when changes are needed to the previously filed BOI report information about the company or its beneficial owners.

The company must file an updated report no longer than 30 days after the change date. 

3. Corrected Report

A corrected form is required when previously reported information needs to be more accurate when filed.

The company must correct it no longer than 30 days after it became aware of the inaccuracy. 

4. Newly Exempt Entity Report

If your company has previously filed a Beneficial Ownership Information (BOI) report but subsequently becomes exempt from this requirement, you’ll need to take specific steps to update your records.

When a reporting company transitions to exempt status, it must submit a newly exempt BOI report. This updated report requires:

  1. Identifying the entity.
  2. Checking a designated box to indicate its newly exempt status.

This process ensures compliance with the Corporate Transparency Act while accurately reflecting changes in your company’s regulatory obligations.

Keeping your filings up-to-date is crucial to maintaining transparency and adhering to legal standards.

Consulting with legal or compliance professionals is recommended for further guidance on navigating regulatory changes or specific filing requirements.

Essential Details For The BOI Report

The business is mandated to provide the following specific details that must be included in the BOI reports submitted to FinCEN. 

1. Reporting Company Details

  • Legal name of the business
  • Jurisdiction of formation
  • Address of the business
  • Tax ID of the business

2. Beneficial Owner Details

  • Individuals name
  • Date of Birth
  • Address
  • Unique ID number (Passport or Driving License)

Who Are Beneficial Owners?

A beneficial owner is a person who directly or indirectly controls the reporting company or owns or controls at least 25% of its ownership.

Control Reporting Company

They have influence or control over the reporting company’s decisions. This could include holding positions like CEO, CFO, or General Counsel. 

Own or Control At Least 25%

Individuals who own or control at least 25% of the reporting company’s ownership. This may include partners, LLCs, and stockholders.

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Who Are The Company Applicants?

The person who directly files the paperwork to create or register the business with state authorities.

While a company applicant can be either an individual or an entity, a business with more than one individual is involved in the filing, then two company applicants must be reported.

The reporting company will have up to two company applicants. The reporting company is required to report its company applicant if it is created on or after January 1, 2024.

If made before January 1, 2024, it is not required to report its company applicant. 

Direct Filer

The individual is the person who personally submitted the paperwork to establish a domestic reporting company or who personally submitted the paperwork to first register a foreign reporting company.

This person would have physically or electronically submitted the documentation to the secretary of state or a comparable office.

Directs or Controls The Filing Action

The potential company applicant referred to here is the person who mainly oversees or manages the submission of the initial document for creating or registering the company.

This individual is considered a company applicant even if they didn’t personally submit the document to the secretary of state or a similar office.

Are There Any Penalties For Violating BOI Reports?

Failing to file a BOI report with FinCEN can result in penalties. Potential violations can include 

  • Willfully failing to file a BOI report
  • Filing false information
  • Failing to correct or update the report

A person who violates the BOI report may be subject to civil penalties of up to $500 each day, including imprisonment of up to two years or a fine of up to $10,000. 

When Is The Deadline For The BOI Reports To Be Reported?

The deadline for reporting BOI (Beneficial Ownership Information) reports depends on the establishment date of your company:  

  • For companies formed or registered before January 1, 2024, BOI reports must be submitted to FinCEN by January 1, 2025. 
  • For companies established or registered after January 1, 2024, the report must be filed within 90 days from the registration date. 
  • The deadline is 30 days from the registration date for companies formed or registered after January 1, 2025. 

It is essential to ensure the timely submission of the initial BOI report and any subsequent changes in business authority, ownership, or corrections.

In the event of such changes, an amendment should be filed within 30 days.

Final Thoughts

Due to the recent implementation of the Corporate Transparency Act, grasping and adhering to the Beneficial Ownership Information Report (BOIR) is essential.

This mandate is designed to boost transparency, counter financial crimes, and prevent the exploitation of shell companies.

Whether initiating a new enterprise or overseeing an established one, keeping abreast of BOI reporting requirements is crucial for ensuring compliance with legal standards and minimizing potential risks.

Seeking advice from legal and compliance professionals can offer valuable insights for navigating these regulatory complexities effectively.