Why was a new law adopted?

In 2021, the U.S. Congress adopted the Corporate Transparency Act, or “CTA”, which requires most business entities conducting business in the United States to disclose information about the business and its beneficial owners – the individuals who directly or indirectly own or control the business. The CTA is part of the Anti-Money Laundering Act, and the BOI reporting will help U.S. law enforcement combat money laundering, the financing of terrorism, and other illicit activities.

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Who has to make a BOI report?

Certain companies, referred to as “reporting companies”, will be required to report their beneficial ownership information to FinCEN. Most small, closely held companies -- including most “Mom & Pop” real estate holding companies – are considered a “reporting company” and must report.

There are two types of reporting companies – domestic reporting companies and foreign reporting companies. A domestic reporting company is a corporation, limited liability company (“LLC”), or other entity created by filing with a secretary of state or similar office of a state or Indian tribe. A foreign reporting company is a corporation, limited liability company, or other entity formed under the law of a foreign country and registered to do business in an American state or Indian tribal jurisdiction.

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What businesses are exempt from reporting?

There are 23 types of entities that are exempt from reporting, most of which are companies that already provide the BOI to a federal agency, such as publicly traded companies, banks and credit unions, securities brokers/dealers, public accounting firms, tax exempt entities, and certain inactive entities. Also, companies with at least 20 full-time employees, more than $5,000,000 in gross receipts or sales, and an operating presence at a physical office in the U.S. are exempt.

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When does an initial BOI report have to be submitted?

Beginning January 1, 2024, a reporting company created or registered before January 1, 2024 will have until January 1, 2025 to file its initial BOI report. A reporting company created after January 1, 2024 and before January 1, 2025 will have 90 days to file its initial BOI report. This 90-day deadline starts to run from the time the reporting company receives notice of its creation or registration, or the secretary of state’s office provides public notice of the creation or registration – whichever is earlier. Reporting companies created or registered on or after January 1, 2025 will have 30 days to file their initial BOI reports.

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When does an additional BOI report have to be submitted?

A reporting company must submit an additional BOI report whenever there are changes to the information previously reported or if the reporting company discovers that inaccurate information was submitted. If an additional BOI report is necessary, it must be filed within 30 days of the change or the discovery of inaccurate information.

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What information needs to be reported?

If the reporting company was created or registered before January 1, 2024:

Information about the company to be reported:

• Legal name of reporting company;

• Any trade name or DBA;

• Business address;

• State or Tribal jurisdiction of formation; and

• Federal tax identification number.

Information about beneficial owners and controlling individuals:

• Name;

• Birthdate;

• Home address;

• A unique identifying number and the issuing jurisdiction from an acceptable identification document such as a driver’s license or passport, along with an image of the document.

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If the reporting company was created or registered after January 1, 2024:

In addition to the information above, the reporting company will need to provide information about the “company applicants.” Company applicants are: (1) the individual who directly files the document that creates or registers the company; and (2) if more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing.

How does the reporting company file the beneficial ownership information report?

FinCEN is currently developing a secure filing system that will be available for electronic filing through FinCEN’s website. The form to report beneficial ownership information will be available on FinCEN’s website, although as of this time, the form is not yet available.

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Who will be able to access reported beneficial ownership information and for what purposes?

The CTA authorizes FinCEN to disclose beneficial ownership information in certain circumstances to six types of requesters:

• U.S. Federal agencies engaged in national security, intelligence, and law enforcement activities;

• State, local, and Tribal law enforcement agencies with court authorization;

• The U.S. Department of the Treasury;

• Financial institutions using beneficial ownership information to conduct legally required customer due diligence, provided the financial institutions have their customer consent to retrieve the information;

• Federal and state regulators assessing financial institutions for compliance with legally required customer due diligence obligations; and

• Foreign law enforcement agencies and certain other foreign authorities who submit qualifying requests for the information through a U.S. Federal agency.

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What are the penalties for violating these reporting requirements?
Both individuals and corporate entities can be held liable for willful violations. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information. A person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. That person may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000.

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What should you do next?

• Create a list of legal entities in which you have an ownership interest or act in a managerial role.

• Determine if the entity is a “reporting company” or if it qualifies for an exemption.

• Determine who the beneficial owners of the entity are and inform them of this new requirement.

• Collect necessary documents to complete a BOI report.

• If an individual has to report ownership or management in more than one company, that individual may obtain a FinCEN Identifier Number that can be used in the various entities’ BOI filings. Individual FinCEN Identifier Numbers will be available when the FinCEN website goes live in 2024.

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Socius Law Group will provide further updates as more information is available. If you would like to schedule a call to discuss these changes or our recommendations for your business, please contact Teresa Daggett or Jason Bergevin.

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This is intended to be a source of general information, not an opinion or legal advice on any specific situation, and does not create an attorney-client relationship with our readers. If you would like more information regarding whether we may assist you in any particular matter, please contact one of our lawyers, using care not to provide us with any confidential information until we have notified you in writing that there are no conflicts of interest and that we have agreed to represent you on the specific matter that is the subject of your inquiry.

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