Beneficial Ownership Information (BOI) reporting

Starting in 2024, newly formed corporations, limited liability companies (LLCs), limited partnerships, and other entities that file formation papers with a state’s Secretary of State office must file a report with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The report must provide specified information regarding the entity’s “beneficial owners.” Entities in existence prior to January 1, 2024, have until January 1, 2025, to file these reports.

This is part of the federal government’s anti-money laundering and anti-tax evasion efforts and aims to address shell companies used to conceal money. Unfortunately, it will impose burdensome reporting requirements on most businesses. The willful failure to report information, or to timely update any changed information, can result in significant fines of up to $591 per day until the violation is remedied. If criminal charges are brought, penalties can include fines of up to $10,000 and/or two years of imprisonment. These penalties can be imposed on both the beneficial owner and the entity.

Beneficial owners are broadly defined and include individuals who directly or indirectly own at least 25% of the entity’s ownership interests or exercise substantial control over the reporting company (even if they do not have an ownership interest). While this may appear to impact only a few significant owners, it can also include many senior officers of the business and individuals who are involved in significant business decisions (e.g., board members).

For entities formed after 2023, information will also need to be provided about the company applicants—the person who actually files the entity’s formation/registration papers with the Secretary of State’s office.

The types of information that must be provided (and kept current) for beneficial owners and company applicants include the owner’s legal name, residential address, date of birth, and a unique identifier number from a non-expired passport, driver’s license, or state identification card. The entity will also have to provide an image of one of these forms of documentation to FinCEN for all beneficial owners.

Most entities must file these reports by January 1, 2025. However, entities formed in 2024 will have 90 days from their formation/registration date to file these reports. Entities formed after 2024 must file the report within 30 days of their formation/registration.

Should any of the reported information change, or if a beneficial ownership interest is sold or transferred, the entity must report this information within 30 days of the change or face potential penalties as described above. Changes include reporting a beneficial owner’s change of address or name and resubmitting an updated passport, driver’s license, or state identification card to reflect these changes.

It’s important to contact our office to discuss who might be treated as a beneficial owner in your business and what systems we can put in place to ensure that the information regarding these beneficial owners is kept current.