What Businesses Need to File a Beneficial Ownership Information (BOI) Statement with FinCEN?

The Beneficial Ownership Information (BOI) filing requirement is a critical part of the Corporate Transparency Act (CTA), which aims to improve transparency in the business sector and combat financial crimes like money laundering and tax evasion. The Financial Crimes Enforcement Network, commonly known as FinCEN, oversees the BOI filing requirements. If you’re wondering whether your business needs to file a BOI statement, this guide will clarify what businesses are required to comply.

Which Businesses Must File a BOI Statement?

Most businesses that are formed or registered in the United States are required to submit a BOI statement. This requirement applies to the following types of companies:

1. Corporations: This includes both C-corporations and S-corporations.
2. Limited Liability Companies (LLCs): Both single-member and multi-member LLCs are included.
3. Limited Partnerships (LPs).
4. Limited Liability Partnerships (LLPs).
5. Business Trusts or similar entities that are registered by filing with a state.
6. Any Business Entity Created by Filing with a State or Tribal Authority: This includes businesses that file documents like articles of incorporation or certificates of formation with the Secretary of State or similar state authority.

What is a “Reporting Company” for BOI Compliance?

The key term to know is a “reporting company.” A reporting company is generally defined as:

• Any entity that was created by filing a formation document (such as articles of incorporation or a certificate of formation) with a state or tribal authority.
• Any foreign entity that is registered to do business in the United States through state registration.

If your business falls under these criteria, you must file a BOI report with FinCEN.

Information Required for BOI Filing

Businesses that qualify as “reporting companies” need to provide the following details in their BOI statement:

1. Company Information:

   • Full legal name of the business.
   • Principal business address.
   • Jurisdiction of formation or registration.
   • Unique identifier, such as the Employer Identification Number (EIN).

2. Beneficial Owner Information: A beneficial owner is any individual who:

   • Owns or controls 25% or more of the business’s ownership interests, OR
   • Exercises substantial control over the business operations.

For each beneficial owner, the following information must be included:

• Full legal name.
• Date of birth.
• Residential address.
• A unique identifying number (like a driver’s license or passport).

Which Businesses Are Exempt from BOI Filing?

While many businesses must comply with the BOI reporting requirements, some are exempt. These exemptions are primarily for entities that are already under strict regulatory oversight or are unlikely to be used for illegal activities. Here are the main categories of exempt businesses:

1. Large Operating Companies:

   • Must have more than 20 full-time employees in the U.S.
   • Must have over $5 million in gross receipts or sales annually.
   • Must have a physical operating presence within the United States.

2. Publicly Traded Companies: Businesses that are publicly traded and subject to SEC reporting requirements are exempt.

3. Heavily Regulated Entities: This includes entities like:

   • Banks, credit unions, and financial institutions.
   • Insurance companies.
   • Broker-dealers.
   • Money transmitting businesses.
   • Investment advisors.
   • State-regulated insurance providers.
   • Public accounting firms registered with the Public Company Accounting Oversight Board (PCAOB).
   • Nonprofit and tax-exempt organizations (such as 501(c)(3) entities).

4. Inactive Entities: Entities that have been inactive for over 12 months, have no assets, no business activity, and no ownership changes in the past 12 months may qualify for exemption.

5. Governmental Authorities: Federal, state, and local government agencies, as well as wholly owned subsidiaries of these entities, are exempt from BOI filing.

Key Deadlines for BOI Filing

To ensure compliance with the Corporate Transparency Act, pay attention to the following deadlines:

• Existing Entities (formed before January 1, 2024): Must file a BOI report by January 1, 2025.
• New Entities (formed on or after January 1, 2024): Must file within 30 days of formation or registration.
• Updated Information: Any changes in beneficial ownership must be reported within 30 days of the change.

Special Situations for BOI Filing

• Foreign Entities Operating in the U.S.: Any foreign entity registered to conduct business in the United States must comply with the BOI filing requirements.
• Subsidiaries of Exempt Entities: If a parent company is exempt, its subsidiaries may still need to file unless they also meet exemption criteria.
• Holding Companies: Even if they do not engage in active operations, holding companies must file BOI if they do not meet exemption criteria.

What Are the Penalties for Not Filing a BOI Statement?

Failure to comply with BOI reporting requirements can lead to severe consequences:

• Civil Penalties: Up to $500 per day for late filings.
• Willful Violations: Penalties of up to $10,000, and potential criminal charges, including up to two years of imprisonment.

Steps to Ensure BOI Compliance

To avoid penalties, here’s how you can stay compliant with BOI filing requirements:

1. Determine if Your Business is a Reporting Company: Assess whether your business falls under the reporting requirement.
2. Track Important Deadlines: Make sure you are aware of the filing deadlines relevant to your business.
3. Keep Accurate Records: Maintain detailed records of your beneficial owners and company information to ensure accuracy.
4. Consult a Professional: If you have any uncertainty about BOI compliance, seek advice from a tax expert or legal advisor.

Conclusion

Understanding which businesses need to file a Beneficial Ownership Information (BOI) statement with FinCEN is essential to staying compliant under the Corporate Transparency Act. Most privately-held businesses will need to file unless they meet specific exemption criteria, such as being a large operating company, a publicly traded business, or a heavily regulated entity. Failure to comply can lead to costly penalties and legal repercussions, so it’s crucial to know your obligations and meet deadlines.

By staying compliant with BOI requirements, your business not only avoids fines but also contributes to a more transparent and secure business environment.