The Corporate Transparency Act of 2021 in the United States mandates that both local and foreign entities must disclose their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), which is a bureau of the US Department of the Treasury. This compliance requirement forms a part of the U.S. government’s efforts to make it more challenging for dishonest individuals to conceal or profit from their illegally obtained funds through shell companies or other unclear ownership structures. This article will address frequently asked questions about Beneficial Ownership Information reporting as a compliance requirement for US companies
WHAT IS BENEFICIAL OWNERSHIP INFORMATION (BOI)?
This is information about an entity, its beneficial owners, and its company applicants in certain cases.
WHO IS REQUIRED TO REPORT BENEFICIAL OWNERSHIP INFORMATION?
Both domestic and foreign reporting companies are required by FinCEN to report beneficial ownership information. Domestic reporting companies include corporations, limited liability companies, and any other entities that are registered with a secretary of state or any similar office in the United States. On the other hand, foreign reporting companies are entities, such as corporations and limited liability companies, formed under the law of a foreign country that has registered to carry out business in the United States by filing a document with a secretary of state or any similar office.
ARE THERE ENTITIES EXEMPTED FROM THE BOI REPORTING REQUIREMENT?
There are 23 types of entities that are exempt from satisfying the BOI (Beneficial Ownership Information) requirement. However, these exempted entities must satisfy certain checklists to qualify as exempt. We recommend that adequate checks be done to ensure that your US company falls into this category.
The exempted entities are as follows: Securities reporting issuer, Governmental authority, Bank, Credit Union, Depository Institution Holding Company, Money Services Business, Broker or dealer in securities, Securities Exchange or Clearing Agency, Other Exchange Act Registered Entity, Investment company or Investment Adviser, Venture Capital Fund Adviser, Insurance Company, State-licensed Insurance producer, Commodity Exchange Act registered entity, Accounting firm, Public Utility, Financial Market Utility, Pooled Investment Vehicle, Tax-exempt entity, Entity assisting a tax-exempt entity, Large Operating Company, Subsidiary of certain exempt entities, and Inactive entity.
WHAT INFORMATION DO I REPORT ABOUT MY COMPANY?
1. Details of the company such as legal name, trade name(where applicable), current US address, State, tribe, or foreign jurisdiction of formation (where applicable), IRS tax identification number, and EIN (Employer Identification Number)
2. Details of the beneficial owner(s) and applicant (where applicable). Applicants may not meet the BOI reporting requirement in certain cases. However where they do, the following information may be required; Name, date of birth, address, unique identifying number and issuing jurisdiction, Image of US or foreign passport, State driver’s license, or Identification document issued by a State, Local Government, or a Tribe.
WHEN DO I REPORT BENEFICIAL OWNERSHIP INFORMATION TO FinCEN?
Companies that need to submit BOI (Beneficial Ownership Information) reports can start doing so from January 1, 2024. For companies that were created before January 1, 2024, it is mandatory to submit BOI reports before January 1, 2025. If a reporting company is created or registered to do business in the United States between January 1, 2024, and January 1, 2025, then it must file its first BOIR within 90 days after receiving actual or public notice that its creation or registration is effective. However, if a reporting company is created or registered to do business in the United States after January 1, 2025, then it must file its first BOIR within 30 days after receiving actual or public notice that its creation or registration is effective.
HOW DO I REPORT BENEFICIAL OWNERSHIP INFORMATION TO FinCEN?
The report is submitted electronically through a secure filing system.
CONCLUSION
Beneficial Ownership Information (BOI) reporting requirement is a mandatory compliance requirement for all entities, both local and foreign, that are registered and operating in the United States. Failure to comply with this requirement or providing false or fraudulent BOI may result in civil or criminal penalties. The penalties for non-compliance include a daily fee of $500, imprisonment for up to two years, and/or a fine of up to $10,000.
If you need help with your US company’s BOI filing compliance, please reach out to us via the WhatsApp icon on the lower right part of this page or HERE and we’ll respond to you promptly.
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