Beneficial Ownership Information (BOI) Reporting: What Every Business Needs to Know

By TED ROSE, ROSE FINANCIAL SOLUTIONS

Updated: The Treasury Department announced March 2 that it will no longer enforce the Corporate Transparency Act or the associated beneficial ownership information reporting requirements. While no immediate filing obligations are required, ROSE recommends businesses consider filing proactively in anticipation of future approval and deadlines. If you have any compliance questions, please contact us.

Starting January 1, 2024, a pivotal new regulation has come into effect in the United States under the Corporate Transparency Act (CTA). This legislation mandates that most businesses report their Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN), marking a significant shift in how business ownership is documented and tracked. This article will provide a detailed overview of the new BOI reporting requirements, their importance, and how businesses can stay compliant.

Overview of BOI Reporting Requirements

The BOI reporting mandate stems from the Corporate Transparency Act (CTA), which is part of the broader effort by the U.S. government to enhance corporate transparency and combat financial crimes. The Financial Crimes Enforcement Network (FinCEN) is the agency responsible for overseeing this new requirement and ensuring that businesses comply with it.

The primary goal of BOI reporting is to create a centralized registry of individuals who have substantial control or ownership stakes in businesses. This registry will help law enforcement agencies identify and combat illegal activities such as money laundering, tax evasion, and fraud. Transparency in corporate ownership is essential to prevent bad actors from using anonymous or shell companies for illicit purposes.

Why BOI Reporting Matters

BOI reporting is not just about following regulations—it's about protecting the integrity and reputation of your business. By complying with these new requirements, businesses can avoid hefty penalties and ensure they operate lawfully. Failing to comply can lead to significant fines and criminal penalties, which could severely damage a company’s financial standing and public reputation.

What is BOI Reporting?

BOI reporting requires businesses to disclose detailed information about individuals who either own or control a significant portion of the entity. Specifically, companies must report individuals who:

• Have substantial control over the business, or

• Own at least 25% of the entity, either directly or indirectly.

The central purpose of this reporting requirement is to create a database that allows law enforcement and regulatory bodies to track the real owners of businesses. This prevents individuals from hiding behind anonymous corporate structures to engage in illegal activities.

FinCEN's Role in BOI Reporting

FinCEN is responsible for collecting, maintaining, and protecting the BOI registry. The information gathered through this reporting will not be publicly accessible but will be made available to law enforcement agencies and other authorized entities. FinCEN will also play a critical role in ensuring that businesses comply with these new regulations. Non-compliance will result in enforcement actions, including both civil and criminal penalties.

Who Must Report BOI?

The BOI reporting requirement applies to a broad range of entities, including both domestic and foreign companies operating in the United States. Specifically, the following businesses are subject to BOI reporting:

• Domestic Reporting Companies: These include corporations, limited liability companies (LLCs), and other entities created by filing with a U.S. state or tribal authority.

• Foreign Reporting Companies: Entities formed under foreign laws but registered to do business in the United States must also comply with the reporting requirement.

However, there are some exemptions. Certain large operating companies and tax-exempt nonprofits are exempt from BOI reporting if they meet specific criteria. For example, large operating companies are exempt if they have more than 20 full-time employees, maintain a physical office presence in the U.S., and report over $5 million in gross receipts or sales on their prior year federal income tax return.

Information Required for BOI Reporting?

To comply with BOI reporting, businesses must submit specific information about their beneficial owners, including:

• The individual's full legal name,
• Date of birth,
• Current residential address,
• A unique identifying number (such as a passport number or driver's license number), and
• An image of the identification document to verify the information.

This comprehensive data collection ensures that FinCEN has accurate and verified information about individuals who own or control U.S. businesses.

Ted Rose

President, CEO, and Founder

In 1994 Ted Rose founded Rose Financial Solutions (ROSE), the Premier U.S. Based Finance and Accounting Outsourcing Firm. In 2010, the Blackbook of Outsourcing named ROSE the #1 FAO firm in the world based on client satisfaction. As the president and CEO of ROSE, he provides executives with financial clarity. Ted has also acted as the CFO for a number of growth companies and assisted with various rounds of financing and M&A transactions.