A new BOI reporting requirement came into effect on January 1, 2024, for US and foreign entities that conduct business in the United States. BOI reporting refers to the obligation to report Beneficial Owner(s) Information (BOI) of certain business entities to the US government.
It applies to most small US businesses, both US and foreign-owned entities. So even a foreign-owned LLC must report their Beneficial Ownership Information.
Not providing the required information on time or reporting false information can lead to hefty fines and even prison.
What is BOI Reporting?
BOI stands for Beneficial Ownership Information. Effective January 1, 2024, the Corporate Transparency Act (CTA) requires reporting Beneficial Owner(s) Information (BOI) of entities incorporated, or entities doing business in the United States. It applies to a wide range of companies, both US and foreign entities. Some exemptions are available although generally not applicable to most small businesses. More about those exemptions in a moment.
BOI Reporting is a disclosure report, not a tax form. Therefore, it is submitted through FinCEN, the Financial Crimes Enforcement Network of the Department of the Treasury. This is part of the ongoing efforts to enhance corporate transparency in the US.
Which Companies Must Report Beneficial Ownership Information To FinCEN?
As mentioned, the new FinCEN BOI reporting requirement applies to both US domestic and foreign entities. Reporting Companies can be:
- Domestic Entities: All entities formed with any of the states within the United States, including corporations, limited liability companies (LLCs), and trusts.
- Foreign Entities: All foreign entities, formed outside the United States but registered to do business in the United States.
BOI Reporting Exemptions
Various types of entities are exempt from the new requirements because they already have substantial federal reporting obligations. Those include banks, securities brokers, registered investment advisors, insurance companies, and public companies.
Large operating companies are also exempt. Those generally have more than 20 full-time employees, a physical office in the states, and over $5 million in sales from US sources.
Who Is Considered A Beneficial Owner For BOI?
FinCEN defines beneficial ownership in two ways:
- Any individual who, directly or indirectly, exercises substantial control over the reporting company.
- Any individual who owns or controls at least 25 percent of the capital.
Substantial Control is the key term. It means:
- A senior officer/manager of the Reporting Company, e.g., President, CEO, CFO, General Counsel.
- Someone with the authority to appoint and remove officers or directors.
- A decision-maker of the Reporting Company, e.g., decisions regarding structure, investments, business.
You can find more info in the FinCEN Small Entity Compliance Guide.
What Information Must Be Included In The BOI Report?
The BOI report requires the beneficial owners of a reportable entity to submit their personal information:
- Name
- Date of birth
- Home/registered address
- Passport photocopy
There is no way around providing your personal data. You cannot use a registered agent or other proxy information for the BOI disclosure.
Even if you dissolve your company now, you still must disclose the BOI. Only if the entity was dissolved before January 1, 2024, does the requirement not apply.
When Is The BOI Report Due?
The due date for submitting a report depends on when the entity was incorporated:
- Entities incorporated or formed before January 1, 2024, must file the report before January 1, 2025.
- Entities incorporated in 2024 must file the report within 90 days from its incorporation.
- Entities incorporated on or after January 1, 2025, must file the report within 30 days from its incorporation.
In the event of any changes to the previously reported information, e.g. changes in beneficial owners, address changes, etc., Reporting Companies have 30 days to file an updated report with FinCEN.
Non-Compliance With BOI Reporting
An individual who intentionally fails to comply with the obligation to report beneficial owners or who intentionally reports false information can face significant penalties:
- A civil penalty of up to $500 for each day of non-compliance,
- Criminal penalties of up to $10,000,
- Even imprisonment for up to two years.
The filer of the report (can be anyone), the beneficial owner providing the information for the report, and the entity that the report is being filed for can all be held responsible for the intentional non-compliance.
File Your BOI Report On Time
The BOI report is filed through the Financial Crimes Enforcement Network (“FinCEN”) of the Department of the Treasury and is part of the ongoing efforts to enhance corporate transparency in the US.
As mentioned earlier, besides the entity information, personal information for each beneficial owner is required. Penalties for providing false information or not filing are high.
We can help you with this new filing requirement. Reach out directly to your tax accountant or contact us at contact@onlinetaxman.com.
Hong Kong
Panama
