Beneficial Ownership Information Reporting (BOIR) – Frequently Asked Questions 

Beneficial Ownership Information Reporting (BOIR) – Frequently Asked Questions

Under the Corporate Transparency Act (CTA), many small businesses and LLCs are now required to report Beneficial Ownership Information (BOI) to FinCEN (Financial Crimes Enforcement Network). This guide covers some basic questions about compliance, deadlines, and penalties.

What is the Corporate Transparency Act (CTA)?

The Corporate Transparency Act is a federal law aimed at preventing illegal activity by increasing transparency in business ownership. Under the CTA, many small and medium-sized entities must file reports with FinCEN that disclose their beneficial owners.

This reporting requirement applies to a wide range of entities, including corporations, S Corporations, and LLCs, to reduce the misuse of shell companies for illegal purposes (like money laundering, tax evasion, etc.).

Who needs to report?

Almost all domestic corporations and LLCs registered in the United States must file under this new law. Here’s a breakdown of companies that generally need to report:

• Domestic Entities: Any corporation, limited liability company (LLC), or other entity created by filing paperwork with a U.S. state or tribal authority.
• Foreign Entities Registered to Do Business in the US: Any foreign company registered to operate in the U.S.

There are 23 exemptions that could exclude certain companies from reporting, including large companies, nonprofits, and regulated investment firms. However, each exemption has specific qualifying conditions, so it’s important to carefully review the criteria.

Common Misconceptions about Exemptions

Some exemption titles may sound broad, but they have very specific qualifying requirements. Here are examples of some of the exemptions that we expect to see cause some confusion:

1. Investment Companies: Only registered investment companies and advisors meeting specific regulatory conditions are exempt. Unregistered entities, even if they handle investments, do not automatically qualify.
2. Tax-Exempt Entities: The exemption applies only to specific types of tax-exempt entities under sections of the Internal Revenue Code, like 501(c) organizations. Simply being not-for-profit or having a charitable mission doesn’t guarantee exemption.
3. Inactive Entities: To be considered inactive, a company must have been created on or before January 1, 2020, and must meet other conditions, including no changes in ownership or active financial transactions within the last year.

If you’re uncertain whether your entity qualifies for an exemption, we may be able to clarify the requirements and help you make an informed decision.

What information needs to be reported?

To comply with the CTA, each entity must provide details about its beneficial owners and, in some cases, applicants. Here’s what’s required:

• Beneficial Owners: Full legal name, date of birth, address, and a unique identifying number (e.g., passport or driver’s license number).
• Company Applicants: If your entity was created after January 1, 2024, you may also need to report information about the person who helped register or file your business, known as a “company applicant.”

Beneficial owners include anyone who owns or controls 25% or more of the entity, or who exercises significant control over it. Even if someone doesn’t have official ownership, they may still need to be reported if they play an influential role.

When is the deadline for filing?

• Entities Created Before January 1, 2024: Your initial report is due by January 1, 2025.
• Entities Created On or After January 1, 2024: Reports must be filed within 90 days of formation. Starting in 2025, this deadline tightens to just 30 days.

If your entity is newly formed in 2024, be mindful of this 90-day window; it’s easy to miss, but failing to report on time can lead to costly penalties.

What are the penalties for non-compliance?

Penalties for ignoring this new filing requirement can be significant:

• Civil Penalties: Up to $591 per day for each day the report is late.
• Criminal Penalties: Potential fines up to $10,000 and/or imprisonment for up to two years in cases of willful non-compliance.

How can I file?

Here are a couple options:

1. Hire Us to Handle the Filing - We can help you determine which entities you need to file reports for, determine the beneficial owners, compile the required information, and prepare and file the report for you. Contact us for a consultation to get started.
2. Make Your Own Arrangements - If you prefer to file on your own, you can make sure you have all the necessary documents and information ready, and submit your Beneficial Ownership Information Report(s) directly to FinCEN.

Optional Monitoring Service (Additional Fee)

Because compliance doesn’t end after the initial filing, we also offer an optional monitoring service to help you stay compliant year-round. This includes:

• Scheduled Reminders: We’ll notify you at regular intervals to review and update your BOI report as needed.
• Reporting Changes: Anytime there’s a change in beneficial ownership or control, we can help you update your filing to avoid penalties.

For personalized guidance or questions, please reach out to us as soon as possible. This is a new filing requirement that affects a lot of very small businesses (and even some entities that don’t consider themselves to be “businesses” or “companies”), many of which are unaware of the looming deadline or the substantial penalties that could be imposed.