The Corporate Transparency Act passed in 2021, creating a new requirement to report Beneficial Ownership Information (BOI) about the individuals who ultimately own or control a company, is part of the U.S. government’s efforts to address financial crimes. Starting January of 2024, this report will be required for many domestic and foreign business entities.
Anonymous Companies
Before this reporting requirement, companies were not required to list owners by name. These anonymous companies (also called shell companies) were sometimes used to disguise the identity of their true owner—the person (or people) who ultimately control or profit from the company. These people are also known as the “beneficial owners.”
Often these companies have few or no employees at all, and do not conduct any real business. The owners could include those involved in illegal activities – including embezzlers, arms traffickers, and drug dealers. By leaving their names off the forms they fill out, they created anonymous companies that are perfect for hiding illicit cash.
By creating a centralized database of beneficial ownership information, the government intends to address critical vulnerabilities in our financial system and address illicit finances.
Reporting Requirements
Beneficial ownership information reporting is not an annual requirement. A report only needs to be submitted once, unless the filer needs to update or correct information.
Filing is simple, secure and free of charge. Companies that are required to comply (“reporting companies”) must file their initial reports by the following deadlines:
• Existing companies, created or registered to do business in the US before January 1, 2024 must file by January 1, 2025.
• New companies created or registered to do business in the United States in 2024 have 90 calendar days to file after receiving actual or public notice that their company’s creation or registration is effective.
• New companies created or registered on or after January 1, 2025, will only have 30 calendar days to file.
Generally, reporting companies must provide four pieces of information about each beneficial owner:
• Name
• Date of birth
• Address
• Identifying number, issuer and image of either a non-expired U.S. driver’s license, a non-expired U.S. passport, or a non-expired identification document issued by a State, local government, or Indian tribe. If none of those documents exist, a non-expired foreign passport can be used.
Beneficial owners include any individuals who exercise substantial control over a reporting company or owns at least 25% of an ownership interest in the company.
The reporting entity must also submit certain information about the company , such as its legal name, trade name, address, jurisdiction of formation, and tax ID number.
Reporting companies include corporations, limited liability companies (LLCs), or other entities created or registered by filing documents with the secretary of state or similar state office. Note that sole proprietorships, trusts, and other entities that do not typically require the filing of a formal document with the secretary of state, are generally not considered a reporting company and will not have a filing requirement.
Certain entities, including publicly traded companies and certain large companies may be exempt from reporting.
In addition, reporting companies created on or after January 1, 2024, are required to submit information about the individuals who formed the company (“company applicants”). Company applicants are the individuals who filed the document that created or first registered the reporting company and the individual who was responsible for the direction or control over the filing.
Filing must be done electronically and only through FinCEN’s secure website. Additional Information can be found at fincen.gov/boi-faqs
Failure to file the Beneficial Ownership Information Report, when required, could result in civil penalties (of up to $500 for each day that the violation continues), criminal penalties (of up to two years imprisonment) and a large fine (of up to $10,000).
Please contact us for more information about Beneficial Ownership Information Reporting at 727-327-1999 OR [email protected].
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
