Breaking News! On March 01, 2024, a U.S. District Court Judge in Alabama issued a summary judgement which held that Congress exceeded its constitutional authority in passing the law that instituted Beneficial Owner Information reports. Therefore, filing this report is not currently required. The U.S. Department of Justice (DOJ) has yet to indicate if they will appeal this decision. My recommendation is that you wait to file this report until we know if the DOJ will appeal the judgement.
There is a new filing required starting January 01, 2024 called a report of Beneficial Owner Information (BOI). This is NOT an income tax form. It is an online filing where ownership and control of an entity is reported. The purpose of the report is to help the government combat financial crimes such as money laundering. The report is filed with the Financial Crimes Enforcement Network (FinCEN). The data will be stored in a database accessible by Federal, state, local and foreign law enforcement.
Who must file?
The new filing requirement applies to any entity created by filing a document with the Secretary of State such as an LLC, Corporation, or Limited Partnership.
The following entities are EXCLUDED from the filing requirement:
- Large entities with at least 20 full time employees (avg. 30 hours per week), more than $5M in gross revenue (per prior year federal income tax return) and a physical office in the US.
- Entities in existence before 01/01/2020 that are INACTIVE:
- not conducting a business,
- not owned by foreign persons,
- no change in ownership in the last 12 months,
- no financial transactions over $1K in the last 12 months, AND
- holds no assets including ownership in another entity
Who is a beneficial owner?
The entity must report ALL beneficial owners of the entity. A beneficial owner is a person who directly or indirectly exercises substantial control or a person who owns directly or indirectly at least 25% of the entity. Beneficial owners are always individual persons.
Substantial control includes:
- Senior Officer – Pres, CFO, General Counsel, CEO, COO anyone performing similar functions (Secretary and Treasurer are not included!)
- Anyone who can appoint or remove senior officers or directors
- Anyone who has substantial influence over important decisions
- There is no limit to how many people have substantial control, i.e. Board of Directors. No direct ownership of the company is required to meet the substantial control criteria.
FinCEN declined to adopt any specific rules for constructive ownership of an entity or family attribution rules for ownership, leaving room for uncertainty if a spouse of an owner must be reported.
What information must be reported for each beneficial owner?
The following information must be reported for every beneficial owner:
- Full legal name
- Date of birth
- Complete current RESIDENTIAL address
- Identifying number and the jurisdiction that issued it:
- Passport number – US or foreign
- State Driver License number
- State ID number
- Must upload and IMAGE of the document
Individuals do not have to share this info with the company – they can register directly with FinCEN and obtain a unique FinCEN identifier and supply this to the company. This is particularly helpful for individuals with beneficial ownership in multiple entities.
Due dates and penalties
- Entities formed prior to Jan. 01, 2024, must file not later than Dec 31, 2024
- New entities created DURING 2024 must file within 90 calendar days of formation
- New entities created AFTER Dec. 31, 2024 must file within 30 calendar days of formation
- Changes to beneficial owners must be filed within 30 days of the change
- Corrections of errors must be filed within 30 days of discovery of the error
You file all this information ONCE and then must UPDATE it for any changes in the future.
Penalties: $500 per day for non-filing, fine of up to $10K and/or prison for maximum of 2yrs
Website for more information and to file your report: https://www.fincen.gov/boi