Author: FINCEN.admin

From imprisonment for up to 2 years, or 10K in fines, the BOI penalties are steep.

Share this article!

FinCEN BOI Penalties

The Beneficial Ownership Information Report (BOIR) is a critical component of the U.S. government’s efforts to enhance corporate transparency and combat financial crime. Failure to file a BOI report, or filing it late, can have significant consequences for businesses and their beneficial owners. In this article, we will explore what happens if you fail to file a BOI report, or if you file it after the deadline, emphasizing the importance of timely compliance.

Filing Requirement

The requirement to disclose beneficial ownership of most legal entities was created under the Corporate Transparency Act (CTA), which was signed into law on January 1, 2021. The Beneficial Ownership Information (BOI) rules contained in this legislation requires certain domestic and foreign entities to report information about their beneficial owners (Related: SecureCompliance.us | Corporate Transparency Act: What is Required for FinCEN?) to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. Entities established January 1, 2024, and beyond will also have to report the individuals involved in the filing of formation documents (Company Applicants) (Related: Fincen.gov | Beneficial Ownership Information Reporting Rule Fact Sheet ).

Failure to File a Beneficial Ownership Information Report

Entities that do not file a BOIR may face fines of up to $500 per day for each day the report is not submitted. Additionally, criminal penalties may include fines of up to $10,000 and imprisonment for up to two years. While FinCEN has indicated that they may waive penalties in certain cases for mistakes or omissions that are corrected within 90 days of the deadline for the original report filing, it is uncertain at this point how aggressively BOI penalties will be assessed for late reports, missed deadlines, or incorrect information disclosures.

Avoiding Non-Compliance

To avoid the consequences of not filing a BOIR or filing late, entities should consider these 5 steps:

1. Determine whether your entity is subject to the BOI rule’s reporting requirements.
2. Stay informed of regulatory changes and deadlines related to the BOIR.
3. Ensure that beneficial ownership information is accurate and kept up to date.
4. Submit the BOIR within the specified timeframe.
5. If you are unsure about your compliance requirements, we recommend seeking legal counsel or guidance from regulatory authorities.

Are You Prepared to File?

The consequences for failure to comply with BOIR filing requirements are serious and should not be taken lightly. Businesses and individuals must recognize the legal, financial, and reputational risks associated with non-compliance. To avoid FinCEN BOI penalties, entities should prioritize timely and accurate reporting, staying informed about regulatory obligations, and seeking professional guidance when needed.

Get in Touch

Table of Contents

FinCEN Announces Proposal for 90-day Extension of BOIR Filing Deadline

Share this article!

Breaking News – Introduction

In a recent notice from the Federal Register, dated September 28, 2023, the Financial Crimes Enforcement Network (FinCEN) has proposed amendments to the Beneficial Ownership Information (BOI) reporting rule, potentially impacting entities created or registered in 2024. This proposal seeks to extend the filing deadline for certain BOI Reports (BOIR), providing entities with additional time to comprehend and comply with their new regulatory obligations.

90 Days to File a BOI Report?

FinCEN has proposed to amend the BOI reporting rule, which currently mandates entities created or registered on or after the rule’s effective date of January 1, 2024, to file initial BOIR’s with FinCEN within 30 days of notice of their creation or registration. The proposed amendment aims to extend that filing deadline from 30 days to 90 days for entities created or registered on or after January 1, 2024, and before January 1, 2025.

The proposed extension to 90 days would apply to both domestic and foreign entities created or registered in the United States in the first year after the Reporting Rule becomes effective. However, entities created or registered on or after January 1, 2025, would adhere to the original 30-day filing requirement.

In summary:

• Proposed 90 day filing period for entities formed on 2024 Calendar year
• From January 1, 2025, the original 30-day filing requirement will resume

Purpose of Extension

The extension is intended to grant newly formed reporting companies extra time to understand and adhere to their regulatory duties under the Reporting Rule. This additional time is expected to facilitate these newly established or registered entities through various facets of the Reporting Rule, including determining whether the new legal entity is defined as a “reporting company” or is eligible for an exemption, applying the definition of “beneficial owner” under the rule, and understanding other terms and requirements.

FinCEN believes that extending the time period in the first year is appropriate due to the novelty of the beneficial ownership reporting regime created by Congress under the Corporate Transparency Act (CTA)

Stay Informed

With the strict requirements, penalties and change surrounding this requirement, are you prepared to file your BOIR?

Get informed:

• Do Reporting Companies Need to File a BOI Report?
• Are You Exempt From FinCEN’s 2024 BOI Reporting Requirement?
• FinCEN Beneficial Ownership Reporting Demands Coming in 2024: Are You Prepared?

Secure Compliance is here as your expert guide. Follow us here and on LinkedIn for insights and news updates.

Get in Touch

Table of Contents

Prepare your entity for new reporting requirements January 1, 2024.

Share this article!

Introduction

As part of ongoing efforts to enhance transparency and combat financial crimes, the Corporate Transparency Act (CTA) created new beneficial ownership reporting requirements that will come into effect in 2024. These new reporting requirements will be administered by Financial Crimes Enforcement Network (FinCEN) and aim to shed light on the individuals who exercise substantial control over reporting companies or own significant ownership interests. However, it’s important to note that there are certain entities that are exempt from these reporting obligations. In this article, we will present a brief overview of BOI reporting exemptions from that are currently provided.

Background

Before assessing if your entity is exempt from reporting, you first need to understand if the entity is subject generally to the reporting requirements. Specifically if your entity is domestic, the entity may be a domestic reporting company if it was created by the filing of a document with a secretary of state or similar office of a jurisdiction within the United States. A foreign reporting company would be any entity created under the law of a foreign jurisdiction that is registered to do business in the United States.

By way of example, essentially all corporations and limited liability companies are subject to the reporting requirements generally, but a trust that is formed by a trust agreement that is not filed with a secretary of state may potentially not be subject to reporting.

Understanding BOI Reporting Exemptions

If you have determined that you are dealing with a domestic or foreign reporting company, the Corporate Transparency Act provides exemptions for 23 types of entities from the beneficial ownership information reporting requirement. These exemptions are designed to avoid duplicative reporting and account for entities that are already regulated by federal and/or state governments. These exemptions include:

1. Securities Reporting Issuers

   Securities issuer registered under the Securities Exchange Act of 1934, or required to file supplementary and periodic reporting requirements under the Act.

2. U.S. Governmental Authorities

   Entities that are established under the laws of the U.S., an Indian tribe, a State, or a political subdivision of a State, or under an interstate compact between two or more States, and they exercise authority on behalf of the U.S. or an Indian tribe, State, or political subdivision.

3. Banks

   Banks are defined in Sec. 3 the Federal Deposit Insurance Act, Sec. 2(a) the Investment Company Act of 1940, or Sec. 202(a) of the Investment Advisor’s Act of 1940.

4. Credit Unions

   Any Federal or State credit union defined in Sec. 101 of the Federal Credit Union Act.

5. Depository Institution Holding

   Any bank holding company defined in Sec. 2 of the Bank Holding Company Act of 1956. Also, any savings and loan holding companies defined in Sec. 10(a) of the Home Owners’ Loan Act.

6. Money Services Businesses

   Businesses registered with FinCEN under 31 U.S.C. 5330 and 31 CFR 1022.380 as money services or transmitting businesses.

7. Broker or Dealer in Securities

   Broker and dealers are defined in Sec. 3 of the Securities Exchange Act of 1934 and registered under Sec. 15.

8. Securities Exchange or Clearing Agency

   Exchange and clearing agencies are defined in Sec. 3 of the Securities Exchange Act of 1934 and registered under Sec. 6 or 17A (See link in #7, Broker or Dealer in Securities).

9. Other Exchange Act Registered Entities

   Other entities not included in 1, 7, or 8 above, that are registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (See link in #7, Broker or Dealer in Securities).

10. Investment Companies or Advisers

    Any investment company defined in Sec. 3 of the Investment Company Act of 1940 or advisors defined in Sec. 202 of the Investment Adviser’s Act of 1940, and registered with the Securities and Exchange Commission.

11. Venture Capital Fund Advisors

    Advisors that are described in Sec. 203(l) of the Investment Advisors Act of 1940 and has filed Item 10, Sch. A, and Sch. B of Part 1A of Form ADV with the Securities and Exchange Commission.

12. Insurance Companies

    Companies defined in Sec. 2 of the Investment Company Act of 1940.

13. State-licensed Insurance Producers

    Any entity that is under supervision by the insurance commissioner authorized by a State and has a physical operating presence in the U.S.

14. Commodity Exchange Act Registered Entities

    Registered entities under Sec. 1(a) of the Commodity Exchange Act, and those registered with the Commodity Futures Trading Commission.

15. Accounting Firms

    Any public accounting firm registered under Sec. 102 of the Sarbanes-Oxley Act of 2002.

16. Public Utilities

    Any regulated public utility that provides telecommunications services, electrical power, natural gas, or water and sewer services within the U.S.

17. Financial Market Utilities

    Utilities defined by the Financial Stability Oversight Council under Sec. 804 of the Payment, Clearing, and Settlement Supervision Act of 2010

18. Pooled Investment Vehicles

    All pooled investment vehicles operated or advised by a person described in 3, 4, 7, 10, or 11 above.

19. Tax-Exempt Entities

    In general, any entity that is described in Sec. 501(c) of the Internal Revenue Code that are exempt from U.S. tax, political organizations, trusts under Sec. 4947(a) of the Code.

20. Entities Assisting a Tax-Exempt Entity

    Defined as those who provide financial assistance to entities described in 19 above, is a U.S. person, is beneficially owned or controlled by exclusively one or more U.S. citizens, and receives the majority of its funding from those U.S. persons.

21. Large Operating Companies

    Companies that employ more than 20 full-time employees in the U.S., have a physical operating presence in the U.S., and have gross receipts totaling more than $5,000,000 reported on the preceding year Federal income tax return.

22. Subsidiaries of Certain Exempt Entities

    Any entity whose ownership interests are controlled or wholly owned, directly or indirectly, by one or more entities described 1-17, 19, or 21 described above.

23. Inactive Entities

    Companies in existence on or before January 1, 2020 and are not engaged in active business, not owned by foreign persons, and has no assets. Also, they must not have had any change in ownership or receive funds in an amount greater than $1,000 in the prior calendar or fiscal year.

Do You Need to File?

Assessing if a beneficial ownership report is necessary first requires you to assess if the entity is a domestic or foreign reporting company, which generally is (A) an entity created by filing of a document with a Secretary of State or (B) created under the laws of a foreign country and registered in the U.S.

If you meet this first requirement as a domestic or foreign reporting company, you next need to assess if any of these 23 Corporate Transparency Act exemptions apply. If no exemptions apply, you should be prepared to report beneficial ownership and control in 2024 under these new rules.

If you are unsure if your company is subject to these new filing requirements, we recommend consulting with your advisors for a thorough assessment.

Get in Touch

Table of Contents

FinCEN’s BOI Reporting Requirements 2024 Target Those Controlling Business Entities, Detailing Obligations for Domestic and Foreign Reporting Companies.

Share this article!

BOI Reporting Requirements 2024

In an effort to enhance transparency and combat illicit financial activities, the Financial Crimes Enforcement Network (FinCEN)  has implemented new guidelines for reporting beneficial ownership information. The BOI Reporting Requirements 2024 aim to identify the individuals who ultimately control and benefit from certain business entities. This insight article will focus on who will need to comply with these regulations, shedding light on reporting companies, both domestic and foreign, and their obligations.

What Entities are Considered Reporting Companies?

Under the BOI reporting requirements 2024, reporting companies are obligated to disclose information about their beneficial owners and company applicants. Let’s take a closer look at who falls under the purview of these guidelines.

1. Domestic Companies

   Reporting companies include domestic corporations, limited liability companies (LLCs), and other entities created by filing documents with a secretary of state or similar office, in accordance with state or tribal laws. Sole proprietorships, certain types of trusts, and general partnerships are not considered reporting companies as they are not formed in the same manner. It’s worth noting that FinCEN does not provide a one-size-fits-all definition or a comprehensive list of qualifying offices for entity creation, considering the varying practices across states. However, additional guidance from FinCEN may be provided as deemed necessary.

2. Foreign Companies

   Foreign reporting companies are entities formed under the laws of a foreign country that are registered to conduct business in the U.S. by filing documents with a secretary of state or equivalent office, as per state or tribal laws. Like their domestic counterparts, foreign reporting companies are required to report information about their beneficial owners and company applicants.

Beneficial Owners

To determine who qualifies as a beneficial owner, at least one of the two of the following requirements must be met:

1. Ownership Interest

   An individual is considered a beneficial owner if they have a minimum ownership interest of at least 25% in the reporting company. This means that they directly or indirectly hold a significant share of the company.

2. Substantial Control

   In addition to ownership interest, an individual can also be classified as a beneficial owner if they exercise substantial control over the reporting company. FinCEN outlines three ways in which an individual can meet the substantial control requirement:

   • Senior Officer

     An individual serving as a senior officer of a reporting company, such as the president, chief executive officer, chief operating officer, chief financial officer, or individuals with similar functions.

   • Authority over Appointments

     An individual with the authority to appoint or remove any senior officer of the board of directors or a similar body within the reporting company.

   • Decision-Making Power

     An individual with the power to direct, determine, or substantially influence important decisions made by the reporting company.

There are five exceptions to the definition of beneficial owner that all reporting companies should consider. These exceptions are for:

1. Minor children

   If a beneficial owner is a minor child, the reporting company is not required to provide their information directly. Instead, the parent or guardian’s information should be reported on behalf of the minor child.

2. Nominees, intermediaries, custodians, or agents

   If an individual is acting as a nominee, intermediary, custodian, or agent on behalf of another individual, their information does not need to be reported. Instead, the information of the individual they are representing should be provided.

3. Employees

   An individual who is solely an employee of a reporting company, and whose ownership or control interest in the company arises solely from their employment status, is exempt from being reported as a beneficial owner.

4. Those with future interest through right of inheritance

   If an individual’s only interest in a reporting company is a future interest that arises solely through a right of inheritance, their information is not required to be reported as a beneficial owner.

5. Creditors

   An individual who is a creditor of a reporting company, meaning they have an ownership or control interest solely as a result of a loan or other extension of credit to the company, is exempt from being reported as a beneficial owner.

These exceptions recognize certain scenarios where the reporting of beneficial ownership information may not be necessary, ensuring that the reporting requirements are appropriately applied and reducing potential burdens.

Company Applicants

The term “company applicant” refers to individuals who directly file the document that creates the reporting entity or, in the case of a foreign reporting company, the individual who files the document to first register the entity for business in the United States. It also includes individuals primarily responsible for directing or controlling the filing of the relevant document by another party.

There can be up to two company applicants for each reporting company. Let’s look at some examples:

• Scenario 1: An attorney is creating a new company for a client, and the company will need to file a BOI report. The attorney solely prepares all of the documents to be filed with the applicable state or Tribal office. They file these documents (in person or through online method) with no one else involved in the process.
  • Result: The attorney is the only company applicant for the reporting company. This is because no one else other than the attorney was part of the preparing, directing, or executing the filing
• Scenario 2: Assume the same conditions as the previous scenario, except the attorney directs one of their paralegals to file the formation documents.
  • Result: The attorney and the paralegal are both company applicants for the resulting reporting company. This is because both parties were involved in either preparing, directing, or executing the company filing.

It is crucial to understand that company applicants are only required to file if the entity in question was created on or after January 1, 2024. Entities formed before this effective date are not obliged to report any company applicant information to FinCEN. Also, for new reporting companies, there is no requirement to update FinCEN of any information changes that occurs after the initial BOI filing.

Reporting Company Exemptions

Not only are there exceptions to the definition of beneficial owner, there are 23 specific types of entities that will not be considered reporting companies under this regulation. These exempt entities are often already subject to substantial federal and/or state regulation or are required to provide their beneficial ownership information to a governmental authority. To determine if your business qualifies as an exempt entity, refer to the insights article on this topic, Exemptions: Are You Exempt From FinCEN’s 2024 BOI Reporting Requirement?, which provides detailed information about these exemptions and their applicability.

Are You Prepared to File?

In essence, the BOI reporting requirements 2024 resonate as a call for a heightened sense of responsibility within the business realm. By targeting transparency gaps, these regulations aim to unveil the true beneficiaries of business entities and bring them under the regulatory spotlight. The scope of these guidelines encompasses both domestic and foreign reporting companies.

The criteria for beneficial ownership and company applicants have been outlined, ensuring that only those with substantial influence or control over entities are subjected to reporting under their company.

Get in Touch

Table of Contents

Subscribe for expert insights.

The 2024 Corporate Transparency Act Reporting Requirements by FinCEN Mandate Around 118.5 Million Burden Hours for Existing Reporting Companies, Requiring Them To Provide Specific Information About Owners and Applicants in Their BOI Reports

Share this article!

The Beneficial Ownership Information (BOI) Reporting Requirements introduced by FinCEN under the Corporate Transparency Act are projected to produce approximately 118,572,335 burden hours for reporting companies in Year 1.

These hours will fall to approximately 32,556,929 reporting companies, those of which exist before the effective date. These figures do not include the initial BOI reports for companies established on or after January 1, 2024.

If your company is obligated to comply to these new standards, it’s important to be aware of what information needs to be provided to FinCEN.

---

Corporate Transparency Act Reporting Requirements

Reporting companies are required to provide specific information about themselves, their beneficial owners, and company applicants in their beneficial ownership information (BOI) reports. This insight article will outline the key details that reporting companies will need to provide to FinCEN.

Reporting Companies 

1. Full Legal Name

   Reporting companies must provide their complete legal name as it appears in their formation documents. This ensures accurate identification and proper tracking of the entity.

2. Trade Name or “Doing Business As” Name

   If the reporting company operates under a trade name or a “doing business as” name, it must be included in the BOI report. This additional information aids in identifying the entity beyond its legal name at formation.

3. Business Street Address

   The physical business address of the reporting company must be provided. P.O. boxes are not acceptable. For foreign companies, if their main address is located outside the U.S., they must report the U.S. address where they conduct their business within the country.

4. State or Tribal Jurisdiction

   Reporting companies created under the laws of a state or Indian tribe must disclose the specific jurisdiction where the company was formed. In the case of foreign companies, they need to report the foreign jurisdiction of incorporation and the jurisdiction where they were registered to conduct business within the United States.

5. IRS Taxpayer Identification Number (TIN/EIN)

   Reporting companies should provide their IRS-issued TIN or EIN. If a foreign corporation is not subject to tax filing in the U.S., a foreign taxpayer identification number, along with the originating jurisdiction are acceptable means of an identification number.

Beneficial Owners and Company Applicants

1. Full Legal Name

2. Date of Birth

3. Current Residential or Business Street Address

   Beneficial owners and company applicants must provide their current residential address. However, if the company applicant is involved in the business of corporate formation (such as an attorney or corporate formation agent) and submits the formation or registration document as part of their business activities, then they will provide the current street address of their business.

4. Unique Identifying Number

   Beneficial owners and company applicants are required to provide a unique identifying number from one of the following acceptable documents: a nonexpired U.S. passport, a nonexpired state, local, or Tribal identification document, a nonexpired state-issued driver’s license, or, if an individual lacks one of these documents, a nonexpired foreign passport.

5. Image of Identification Document

   Alongside the provided identifying number, an image of the identification document is required to corroborate the details provided. This helps ensure the accuracy and legitimacy of the information provided.

---

Note: Company applicants are only required to file if the entity in question was created on or after January 1, 2024. Entities formed before this effective date are not obliged to report any company applicant information to FinCEN.

---

Changes in Reported Information

The information provided in the initial BOI (CTA) report may require updates or modifications over time. If any changes occur in the reported information, reporting companies are required to promptly notify FinCEN. In such cases, reporting companies have a period of 30 days from the date of the change to submit the updated information.

These changes might include modifications to the beneficial ownership structure, alterations in beneficial owner details, or updates to the reporting company’s business address. Timely reporting of these changes ensures that FinCEN maintains accurate and up-to-date records. Note that changes in company applicant information do not need to be updated. Reporting company and beneficial owner information are the only parties that must report updates to their information listed above.

Updating the images of beneficial owners’ identification documents are required only when there are changes in numbers 1-4 of Beneficial Owners and Company Applicants reflected on the document. This means that reporting companies are not obligated to provide updated images of identification documents unless there are modifications to the beneficial owner’s full legal name, date of birth, current residential address, or unique identifying number.

To comply with the reporting deadline, reporting companies should establish internal processes and systems to identify any changes that trigger an obligation to report. Keeping track of significant events or updates within the organization will help ensure compliance and prevent any potential penalties or regulatory issues.

Are You Prepared to File?

For companies falling under the scope of these regulations, a comprehensive understanding of the required information is essential. Reporting companies must provide accurate and up-to-date details about themselves, their beneficial owners, and company applicants in their BOI reports. Beneficial owners and company applicants must provide their legal names, dates of birth, current residential or business addresses, and unique identifying numbers, as specified in 31 CFR 1010.380 By doing so, they can maintain compliance with the reporting deadline and prevent potential penalties.

Get in Touch

Table of Contents