Beneficial Ownership Information Deadline Approaches Soon: January 1, 2025

As January 1st nears, your obligation to submit Beneficial Ownership Information (BOI) under the Corporate Transparency Act becomes increasingly pressing. You need to understand who qualifies as a beneficial owner, what details must be disclosed, and the importance of understanding and adhering to reporting obligations to avoid hefty penalties.

A domestic reporting company is formed through the filing of a document with a secretary of state or similar office in the United States and must submit BOI reports to FinCEN unless exempted under specific criteria.

With the clock ticking, have you confirmed that your company’s ownership information is accurate and ready for submission? The consequences of non-compliance could be significant, including civil penalties and even criminal penalties.

Key Takeaways

• The deadline for submitting beneficial ownership information is January 1, 2025 for reporting companies under the Corporate Transparency Act (CTA).

• Accurate reporting includes names, addresses, dates of birth, and identification numbers of beneficial owners.

• Timely submission is essential to avoid penalties and regulatory scrutiny for non-compliance with the reporting requirement.

• Regular updates to ownership information are required to maintain compliance after the initial submission.

• Consider professional legal assistance if ownership structures are complex to ensure compliance to requirements.

Beneficial Ownership Information Reporting: What do you need to know

Understanding who qualifies as a beneficial owner is essential for your compliance with the beneficial ownership information report requirements. Companies created or registered after a specific date must report their beneficial ownership information to FinCEN, with different deadlines based on the creation date of the companies.

Beneficial ownership information reports are crucial for compliance with FinCEN regulations, which aim to accurately identify and report beneficial owners, thereby enhancing transparency and reducing fraudulent activities. The reporting company created before January 1, 2024, has different deadlines compared to those created afterward.

Let’s clarify these key points to be sure you’re prepared before the deadline hits.

Who is a Beneficial Owner?

A beneficial owner is anyone who directly or indirectly enjoys the benefits of ownership in a business or business asset, often holding significant control over it, even if they aren’t listed as the official owner. An individual exercises substantial control if they meet specific criteria.

Typically, a beneficial owner can include individuals who have ownership interests in a company, whether through shares, membership interests, voting rights, or other financial benefits. This can extend to individuals who may not appear on official documents but exert influence over the asset or entity.

The definition of a beneficial owner can vary based on jurisdiction, so it’s critical to understand local regulations. Failing to accurately identify and report beneficial owners can lead to regulatory problems.

Is a Company Applicant the same as a Beneficial Owner?

Not always, but very often the owner is at least one of the company applicants. According to the new regulations, a company applicant is defined as an individual who files the formation documents for a corporation or limited liability company.

If the owner files their own business formation documents, then they are the company applicant. Similarly, if an owner requests for the business formation documents be filed, but someone else (like an employee) files the report, the owner is still a company applicant. However, in that instance the employee who actually submitted the filing would also be a company applicant. A company applicant can be a beneficial owner, a member, an employee, or, in some cases, someone hired by the company that has knowledge of the company’s business, like a business attorney, or bookkeeper.

What is the Corporate Transparency Act (CTA)?

The Corporate Transparency Act (CTA) was enacted in January 2021, the CTA aims to enhance corporate transparency by requiring business entities to report details about the individuals who ultimately own or control the business.

For companies that are created or registered after January 1, 2024, the Reporting Rule imposes specific timelines and obligations regarding Beneficial Ownership Information (BOI) reporting. These new entities must comply with different filing deadlines based on their date of creation or registration.

Under the CTA, reporting companies must provide specific information, including the names, addresses, and identification numbers of their beneficial owners. This legislation is designed to combat illicit activities such as money laundering and tax evasion by making ownership information accessible to law enforcement and regulatory agencies. A foreign reporting company, which is registered to do business in the United States but incorporated overseas, must also adhere to beneficial ownership information reporting to FinCEN.

Frequently Asked Questions About Beneficial Ownership Information Reporting

What is the deadline for BOI?

All reporting companies must submit their BOI by January 1, 2025.

Certain reporting company exemptions exist. If your business qualifies for an exemption, you may not need to report beneficial ownership information.

The BOI report must be filed electronically. Once you’ve reported the necessary information, it’s important to keep it updated. If there are any changes in beneficial ownership, you’ll need to report those changes within a specified timeframe.

Do I need an attorney to file for BOI?

For simple, closely held companies, it may be necessary to file a Beneficial Ownership Information (BOI) report. However, many find it convenient to hire a professional to ensure proper compliance and to avoid the hassle of filing without any help. And for more complex organizations, outsourcing the filing of a BOI makes good business sense.

Ultimately, while you can file for BOI independently, having an attorney can streamline the process and protect your interests. Assess your comfort level and the complexity of your ownership structure to make the best decision for your reporting needs.

What Penalties Exist for Failing to Report Beneficial Ownership Information?

If you fail to report beneficial ownership information, you could face significant penalties.

These can include hefty fines, possibly reaching thousands of dollars per day for ongoing violations.

In some jurisdictions, criminal charges may apply, leading to more serious penalties.

How Will Beneficial Ownership Information Be Stored and Protected?

Beneficial ownership information will be stored in secure databases, typically managed by government agencies or designated third parties.

Access to these data bases is restricted to authorized personnel who have a valid legal basis to view the sensitive data.

Encryption methods protect the information during storage and transmission, minimizing risks of unauthorized access or breaches.

Is There a Fee Associated With Submitting Beneficial Ownership Information?

Generally, there isn’t a direct fee for filing the BOI, but some jurisdictions could have associated costs, like administrative fees or penalties for late submissions.

Are There Exceptions for Reporting Beneficial Ownership for Certain Entities?

Yes, there are exceptions for reporting beneficial ownership for certain entities.

For instance, larger entities, like publicly traded companies, may not need to disclose their beneficial owners due to existing regulatory requirements.

Additionally, entities like certain nonprofit organizations and government bodies might also be exempt.

Consult a legal professional if you have questions about whether your company is exempt from reporting requirement.

Have the Reporting Requirements of the Corporate Transparency Act Been Successfully Challenged in Court?

Recently, Judge Mazzant of the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction enjoining the U.S. Department of Treasury from enforcing the CTA, including the BOI reporting requirements. See Texas Top Cop Shop v. Garland, et. al. Thus, it appears unlikely that enforcement of the CTA will happen immediately in 2025. However, a preliminary injunction is not a final decision. The court decision only temporarily pauses enforcement of the CTA. If the preliminary injunction is overturned on appeal, or if the Justice Department ultimately wins the case, then enforcement of the CTA could resume.

Rather than engage in speculation over the ultimate application of the CTA, we recommend compliance with the reporting requirements before the December 31, 2024 deadline.

Filing Beneficial Ownership Information

Filing beneficial ownership information is a crucial step for reporting companies under the Corporate Transparency Act (CTA). The Financial Crimes Enforcement Network (FinCEN) requires reporting companies to submit beneficial ownership information reports to ensure transparency and prevent financial crimes.

To file your beneficial ownership information, you must gather accurate details about your beneficial owners, including their names, addresses, dates of birth, and identification numbers. This information must be submitted electronically through the designated FinCEN portal.

Accuracy is paramount. Any discrepancies or omissions can lead to penalties, so double-check all information before submission. Once filed, it’s essential to keep this information up-to-date. Any changes in beneficial ownership must be reported within a specified timeframe to remain compliant.

For companies with complex ownership structures, seeking professional legal assistance can be beneficial. Legal experts can help navigate the intricacies of the reporting requirements, ensuring that all necessary information is accurately reported and updated as needed.

By adhering to these guidelines, reporting companies can fulfill their obligations under the CTA, contributing to greater corporate transparency and the prevention of financial crimes.