BOI: Beneficial Ownership Interest Reporting (FinCEN)
The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) is asking for your help to prevent and combat money laundering, tax fraud and other financial crimes. Starting January 1, 2024, some small businesses in the United States will be required to file a Beneficial Ownership Information (BOI) Report with the Treasury as required by the Corporate Transparency Act (CTA) law. Alabama small businesses can download our FinCEN BOI quick-reference guide here.
An Alabama Federal District Court has found the Corporate Transparency Act and its Beneficial Ownership Interest (BOI) reporting to be unconstitutional. Judge Liles C. Burke concluded that “The Corporate Transparency Act is unconstitutional because it cannot be justified as an exercise of Congress’ enumerated powers.”
What now? This will be a wait-and-see situation as the government appeals the decision and FinCEN decides how to address the decision. That said, given the extremely limited reach of the ruling (it only applies to NSBA and its members), it’s doubtful that the Treasury and its FinCEN arm will issue guidance universally suspending CTA enforcement while the appeals process plays out. While the court’s ruling and FinCEN’s response leaves the door open to future litigation (or a legislative change), at this time there is nothing concrete that would suggest that covered reporting companies do not need to comply and file BOI reports by the applicable deadline.
What should you do?
– There will be no hurry in filing BOI reports for existing entities, as the reports are not due to FinCEN until Dec. 31, 2024. You could consider waiting for FinCEN to respond to the court ruling, but don’t let this requirement fall off your radar; set a reminder.
– For entities created during 2024, the entity has 90 days after receiving actual or public notice that their company’s creation or registration is effective to file their initial BOI report. It does not appear that FinCEN will act to resolve this issue in the near future. Most accounting firms are encouraging their clients to comply with the law as written.
Clients note that filing a BOI report is easy.
Most Alabama SBDC clients have reported that the BOI is a straightforward process. To file a Beneficial Ownership Information report, small business owners will need to provide information about the reporting company, beneficial owner and company applicant. But if you have questions, your local SBDC Business Advisor would be glad to help.
This will include date of birth, the legal name of your business and Doing Business As name, address, jurisdiction of where the business was formed or registered, and the Tax Identification Number.
Who is a beneficial owner?
The CTA defines a beneficial owner as an individual who, directly or indirectly, exercises substantial control over a reporting company, or who owns or controls at least 25% of the ownership interests of a reporting company.
Is my small business a reporting company?
Reporting Companies fall under two categories: domestic reporting companies and foreign reporting companies. Both types of reporting companies must file a BOI report. Your small business may be a domestic reporting company if:
- The business is a corporation, OR
- The business is a limited liability company (LLC), OR
- The business was created by the filing of a document with a secretary of state or any similar office under the law of a State or Indian Tribe.
Your small business may be a foreign reporting company if the business was registered to do business in any U.S. State or Tribal jurisdiction by filing a document with a secretary of state or similar office of the State or Tribe.
How do I know if I have to file a BOI report?
A key factor that will determine whether you have to file a Beneficial Ownership Information report is whether you had to file a document with your state’s secretary of state or a similar office to create your company. This also applies to foreign companies that register to do business in the United States.
Do I need to report company applicants?
Only businesses registered on or after January 1, 2024 are required to report their company applicants on the BOI report.
There can be up to two individuals who qualify as company applicants. That includes the individual who first registered or created the reporting company, and the person who is primarily responsible for the filing of the document that creates or registers the company.
Do I qualify for an exemption?
Certain businesses qualify for an exemption to file a BOI report, including:
- 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
- Inactive entity
When is the deadline to submit a BOI report?
If your small business was created or registered before January 1, 2024, you have until January 1, 2025 to submit a Beneficial Ownership Information report. This gives you a year to get acquainted with the rule, get in touch with FinCEN with any questions you may have, and attend one of their upcoming educational events.
If your small business is created or registered between January 1, 2024 and January 1, 2025, you have 90 days to file a Beneficial Ownership Information report. Small businesses created after January 1, 2025 will have 30 days to file.
Who will have access to my information?
Beginning February 20, 2024, FinCEN will provide access to BOI reporting data in phases to authorized government agencies, financial institutions and foreign government agencies that meet the requirements of the Access Final Rule. FinCEN will begin working with such agencies and entities to ensure BOI data is protected by creating new mechanisms and standards to protect sensitive information. For more information about the Final Rule, click here.
Will FinCEN send me correspondence to file a BOI report?
No, the agency won’t be reaching out to small business owners via phone, text or email. FinCEN has been notified of an uptick in fraudulent activity, so please refrain from clicking on links or scanning QR codes within alleged correspondence from FinCEN.
FinCEN has developed a number of resources to help businesses comply with the new requirement, including a Small Entity Compliance Guide. You may also review their quick FAQ on Key Reporting Questions or get in contact directly with FinCEN.