Beneficial Ownership Information (BOI) Filing

By Jeffrey T. Rogers, CPA, MST and Kelly Miranda, CPA, MSA

Effective January 1, 2024, the Corporate Transparency Act has introduced a new mandatory filing referred to as the Beneficial Ownership Information (BOI) report. Administered by the Financial Crimes Enforcement Network (FinCen), which is a bureau of the Department of Treasury, information is being sought on the individuals who ultimately own or control the business entity.

For companies in existence prior to 2024, the deadline to file is January 1, 2025.  A reporting company created or registered in 2024 will have 90 calendar days to file after receiving actual or public notice that its creation or registration is effective. Reporting companies created on or after January 1, 2025 will have to submit their initial report within 30 calendars days of creation or registration. The report must be filed through the BOI E-Filing System, the link which can be found here:  https://fincen.gov/boi.

There is no fee attached to the submission of the BOI report as it is entirely informational. In addition, the BOI report is not an annual filing.  However, certain company changes may require an updated report to be filed within 30 calendar days. Penalties for noncompliance can be steep so it is important to understand the requirements and discuss with the appropriate professionals.

As with every requirement, there are exceptions.  At present time, there are 23 categories of companies that would not be required to submit a BOI report, among those being tax-exempt entities.  A somewhat surprising filing exemption is provided to “Large Operating Companies.”

In order to be considered a Large Operating Company, all three conditions must apply:

• The entity employs more than 20 full-time employees in the US

• The entity has operating presence at a physical office within the US

• The entity filed a Federal income tax return in the US for the previous year with more than $5 million in gross receipts

A full list of exempted entities are listed in the BOI Small Entity Compliance Guide, which can be found here:  BOI Small Entity Compliance Guide.

One classification of entity that will not be found on the exemption list are the smaller secondary entities that business owners often utilize outside the operating company.  For example, the LLC that owns real estate.  With limited exception, these will require reporting.

Once the determination is made that a filing is necessary, the next challenge is to determine the “beneficial owners” that a reporting company must identify.

A beneficial owner is defined as any individual who:

• Exercises substantial control over a reporting company or

• Owns or controls at least 25% of the ownership interests of a reporting company

An individual is considered to exercise substantial control if any of the 4 apply:

• The individual is a senior officer

• The individual has authority to appoint or remove certain officers or a majority of the directors

• The individual is a decision-maker

• The individual has any other form of substantial control over the company

Clearly there is a lot of vagueness to these criteria but the BOI Small Entity Compliance Guide provides pages of definitions and examples that should be carefully reviewed with a qualified professional.  However, you must take caution over which professional you choose to provide consultation as FinCEN has learned of fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the Corporate Transparency Act.

These fraudulent scams may include:

• Correspondence requesting payment. As mentioned, there is no fee to file BOI directly with FinCEN. FinCEN does NOT send correspondence requesting payment to file BOI.

• Correspondence that asks the recipient to click on a URL or to scan a QR code. These e-mails or letters are fraudulent and clicking on any links, opening attachments or scanning QR codes in emails, on websites, or in any unsolicited mailings is not advisable.

• Correspondence that references a “Form 4022,” or an “Important Compliance Notice.” FinCEN does not have a “Form 4022.”

• Correspondence or other documents referencing a “US Business Regulations Dept.” As there is no government entity by this name.

Should you wish to review any of the above, please reach out to an EJC partner who may be able to assist with the filing or advise when discussion with your legal representative is more appropriate.