Is Your Business Subject to the New BOI Reporting Rules?
The Corporate Transparency Act (CTA), effective from January 1, 2024, introduces significant changes in the way businesses report their beneficial ownership information (BOI). These changes are designed to enhance transparency and combat financial crimes such as money laundering, tax evasion, and terrorism financing. Here’s what you need to know about the new BOI reporting rules and how they might affect your business.
Who’s Needs to Report?
The new BOI reporting requirements apply to a wide range of entities. Most corporations, limited liability companies (LLCs), and other similar entities created or registered in the United States must comply. Specifically, any domestic or foreign company registered to do business in the U.S. will need to report unless they fall under one of the exemptions.
Exemptions
Not all entities are required to report their beneficial ownership information. The CTA provides several exemptions, including:
- Large Operating Companies: Companies with over 20 full-time employees, more than $5 million in gross receipts or sales, and an operating presence at a physical office within the U.S.
- Regulated Entities: Entities already subject to extensive federal and state regulation such as banks, credit unions, and investment advisers.
- Inactive Entities: Entities that were in existence on or before January 1, 2020, not actively engaged in business, and holding no assets.
- Certain Governmental and Nonprofit Entities: Various government bodies and nonprofit organizations are also exempt.
What Information Must Be Reported?
Reporting companies must provide FinCEN (Financial Crimes Enforcement Network) with detailed information about their beneficial owners. A beneficial owner is any individual who:
- Exercises substantial control over the entity.
- Owns or controls at least 25% of the ownership interests.
The required information includes:
- Full legal name
- Date of birth
- Residential or business address
- Unique identifying number from an acceptable identification document (such as a passport or driver’s license).
Reporting Deadlines
For entities created or registered before January 1, 2024, the deadline to submit their initial BOI reports is January 1, 2025. For entities formed or registered after January 1, 2024, initial reports must be submitted within 30 days of formation or registration. Additionally, any changes in beneficial ownership must be reported within 30 days of the change.
Compliance and Penalties
Non-compliance with the BOI reporting requirements can result in significant penalties. Willful failure to report, or the submission of false information, can lead to civil and criminal penalties, including fines up to $591 per day up to $10,000.
Steps to Ensure Compliance
To ensure compliance with the new BOI reporting rules, businesses should:
- Review and Identify Beneficial Owners: Determine who qualifies as a beneficial owner under the CTA.
- Gather Required Information: Collect the necessary information for each beneficial owner.
- Consult with Legal Advisors: Work with legal professionals to understand the specific requirements and exemptions that may apply to your business.
- Prepare for Ongoing Reporting: Establish procedures to track changes in beneficial ownership and report them promptly to FinCEN.
The new BOI reporting rules represent a significant shift towards greater transparency in business operations. By understanding and complying with these requirements, businesses can avoid penalties and contribute to the broader effort of combating financial crimes.
For more detailed information, please consult the full text of the Corporate Transparency Act or seek guidance from legal experts specializing in corporate compliance.
