Beneficial Ownership Information Reporting

  • Real estate
  • 9/26/2023

Effective January 1, 2024, many closely-held businesses in the United States will be required to report information about their beneficial owners, defined as individ...

Effective January 1, 2024, many closely-held businesses in the United States will be required to report information about their beneficial owners, defined as individuals who ultimately own or control the company, to the Financial Crimes Enforcement Network (FinCEN), a bureau of the Department of the Treasury.  Entities subject to BOI reporting include a corporation, limited liability company, or any other entity created by the filing of a document with the secretary of state or similar office under state, Tribal or foreign country law.

Before we dive in, some quick background: In 2021, Congress enacted the Corporate Transparency Tax Act which established uniform beneficial ownership information (BOI) reporting requirements for certain types of corporations, limited liability companies, and other similar entities created in or registered to do business in the United States.  The primary objective of the Corporate Transparency Tax Act is to collect information needed to prevent bad actors from using the United States financial system to facilitate fraud, drug trafficking, corruption, tax evasion, organized crime or any other illicit activities. The Corporate Transparency Tax Act authorized FinCEN to collect and disclose BOI information to authorized government authorities and financial institutions.  

There are two types of entities subject to BOI reporting: 1

  • A domestic reporting company is a corporation, limited liability company (LLC), or any entity 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.
  • A foreign reporting company is a corporation, LLC, or other entity formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office.

Reporting companies created or registered to do business before January 1, 2024 must file their initial BOI reports with FinCEN on or before January 1, 2025.  Reporting companies created or registered to do business on or after January 1, 2024 will have 30 days from creation or registration to file their initial BOI reports.  Any changes to previously reported BOI must be reported to FinCEN within 30 days.  There is no fee to file BOI reports with FinCEN.

A reporting company will need to report its legal name, any trade/doing business as/trading as names, the current street address of its United States place of business, jurisdiction of formation or registration, Internal Revenue Service taxpayer identification number, and the type of BOI filing (i.e. initial report, a correction of a prior report, or an update to a prior report).  A reporting company will also need to BOI report for each individual who is a beneficial owner or a company applicant.  Under the BOI reporting rule, there are 23 types of entities that are exempt from the definition of a “reporting company.”

A “beneficial owner” is any individual who:

  • Directly or indirectly exercises “substantial control” over the reporting company, or
  • Directly or indirectly owns or controls 25% or more of the “ownership interests” of the reporting company. 2 

A “company applicant” includes:

  • The individual who directly files the document that creates, or first registers, the reporting company, or
  • The individual that is primarily responsible for directing or controlling the filing of the relevant document.

FinCEN is unable to accept BOI reports prior to January 1, 2024.  The BOI reporting page on the FinCEN website has a treasure trove of information to get you prepared!  

1 FinCEN expects that these definitions mean that reporting companies will include, subject to the applicability of specific exemptions, limited liability partnerships, limited liability limited partnerships, business trusts, and most limited partnerships, in addition to corporations and LLCs, because such entities are often created by a filing with a secretary of state or similar office.  Other types of legal entities, including certain trusts, are excluded from the definitions to the extent that they are not created by the filing of a document with a secretary of state or similar office. FinCEN has acknowledged that in many states, the creation of most trusts typically does not involve the filing of such formation documents.

2 A senior officer such as the CEO, CFO, COO or General Counsel can be viewed as someone that exercises substantial control and is therefore considered to be a beneficial owner.  To say it differently, a person that is able to make important decisions on behalf of the entity.

3 The BOI reporting rules do not require reporting companies existing or registered at the time of the effective date of the rule to identify and report on their company applicants. 

This blog contains general information and does not constitute the rendering of legal, accounting, investment, tax, or other professional services. Consult with your advisors regarding the applicability of this content to your specific circumstances.

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