The Corporate Transparency (CTA) was a landmark piece of legislation to lessen the presence of “dark money” in our daily lives, as many organizations frequently hide their true ownership and intents behind shell companies. Unlike publicly-traded companies that are required to make key leaders and majority owners publicly known, private companies could do just that until the CTA passed.

Now, even one-person companies are subject to the Beneficial Ownership Information (BOI) filing requirements put in place by the Financial Crimes Enforcement Network (FinCEN), a subset of the US Treasury Department.

Here’s what business owners need to know about beneficial ownership information reporting, FinCEN BOI regulations, and what they must disclose by January 1, 2025.

What is Beneficial Ownership Information Reporting?

FinCEN started collecting beneficial ownership information about businesses on January 1, 2024.

Beneficial ownership includes both direct and indirect ownership and control of a company. For example, you would be direct owners if you started a business alone or with a partner. If you later took on an angel investor to grow your business, they would be considered an indirect owner for BOI reporting purposes.

Individuals named to your corporate board or as a special counsel may also be subject to FinCEN BOI regulations if they have a say in operations, even if they don’t receive dividends or other compensation. The keyword here is the “benefit” part: is another person or entity entitled to a share of the profits or how the company is run?

Under the CTA, this information is accessed by regulatory agencies such as the Treasury Department, state and local law enforcement, national security and intelligence agencies, and financial institutions with certain due diligence requirements.

Unlike publicly-traded companies, the information FinCEN collects on private companies would not become publicly available. Per FinCEN’s BOI FAQs, this information is not covered under the Freedom of Information Act. It’s only visible to certain governmental and regulatory bodies.

Who Needs to File BOI Reports?

Most for-profit organizations must report beneficial ownership information to FinCEN by January 1, 2025. FinCEN groups reporting companies into two categories: domestic reporting companies and foreign reporting companies.

If your business is a corporation or LLC, it is likely subject to BOI reporting mandates. This also applies to other entities like partnerships, if the company was created by filing documents with a secretary of state, division of corporations, or similar office in the state in which you reside. However, it would not apply to sole proprietorships and freelancers who report their income on their personal tax returns but do not form a business entity of any kind.

Foreign companies that do business in the US may also be subject to BOI reporting mandates if any filings were created with US state offices, such as a secretary of state.

FinCEN has a comprehensive list of exemptions to BOI reporting requirements; these exemptions include:

• Nonprofit organizations
• Securities brokers and dealers
• Money service businesses
• Banks
• Credit unions
• Public Utilities
• Publicly traded companies that meet specific terms
• Accounting firms
• Insurance companies
• Inactive entities

BOI Reporting Requirements

Reporting companies need to send the following information about each beneficial owner to FinCEN:

• Full legal name
• Date of birth
• Current residential address
• Identification numbers, such as a Social Security Number or ITIN
• FinCEN ID, if they already have one
• Percentage of ownership in the entity
• Their title or role

Deadlines and Non-Compliance Penalties

FinCEN began collecting beneficial ownership information on January 1, 2024. Most firms subject to this mandate have until January 1, 2025 to file. Companies created on or after January 1, 2025 have 30 days from their registration date to file BOI reports with FinCEN.

Failure to comply with reporting mandates starts with a base civil penalty of $500 for each day that the report is not made. Willfully failing to file this report or falsifying information carries criminal penalties of up to $10,000 and two years imprisonment.

How Accounting Freedom Can Help

BOI reporting requirements can be confusing to navigate, especially if you are unsure which parties need to be reported as beneficial owners or if your business is even required to make a report. Accounting Freedom can help you navigate the process and determine your compliance requirements so any required BOI reports get filed on time.

Ensure your business stays compliant with Accounting Freedom’s expert financial and compliance services. Contact us today to learn more!