Beneficial Ownership Reporting

Small Business Planning

Blake Miller, CPA, CFE, Partner

The 2021 Corporate Transparency Act created a new beneficial ownership information (BOI) reporting requirement for small businesses starting January 1, 2024.   The purpose of this legislation was to combat bad actors from concealing their ill-gotten gains through shell companies or other opaque ownership structures in the U.S.  The act will be administered by the Financial Crimes Enforcement Network (FinCEN) which is a bureau of the US Department of Treasury. 

Who has to report?

All companies created by filing a document with a secretary of state within the US.  This includes corporations, limited liability companies and other entities, including foreign companies registered with a secretary of state to do business in the US.  There are some significant exemptions to this reporting requirement and some major ones are (non-exclusive list):

  • Securities reporting issuer (public companies)
  • Credit Unions
  • Commodity Exchange Act registered entities
  • Tax-exempt entities (charities)
  • Subsidiary of certain exempt entities
  • Large operating companies

To qualify for the Large operating company exclusion, you must meet all of the following:

  • Employ more than 20 full-time employees in the United States (full-time is defined as an average of at least 30 hours per week or 130 hours per month)
  • Operating presence within the United States
  • File a Federal income tax return with gross receipts more than $5,000,000

What is to be reported?

If you must report, they want to know who has substantial control over the company and who owns or controls at least 25% of the reporting company.  Substantial control includes senior officers of the Company, anyone with the ability to appoint or remove a senior office of the Company, and anyone who directs or has substantial influence over the important decisions made by the Company.

Reporting Timeline

All existing businesses as of January 1, 2024 will have until the end of 2024 to file the required documentation with FinCEN.  Any companies established after January 1, 2024 will have 90 days to comply with the filing requirements and new companies after January 1, 2025 will have 30 days to file.  A person who willfully violates the reporting requirements may be subject to civil penalties of $500 for each day the violation continues and criminal penalties.  FinCEN has allowed for third-party service providers to submit the information on behalf of the reporting company.  If you use a third-party service provider, it is recommended that you obtain a transcript of the BOI report for your records.

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