Ashley Bolduc, Partner
Cummins & White LLP provides an update and guidance on the reporting requirements recently enacted by the US Treasury Department’s Financial Crimes Enforcement Network (FinCen) under the Corporate Transparency Act passed by Congress and signed by the President in 2021. The reporting rule requires US-based companies to submit a report on their beneficial ownership (“BOI Report”).
The reporting rule became effective on January 1, 2024, however, companies in existence as of December 31, 2023 have until January 1, 2025 to submit the BOI Report.
Who the reporting rule applies to:
It requires most corporations, limited liability companies and other entities created in or registered to do business in the US to report information about their beneficial owners — the persons who ultimately own or control the company, unless the company falls under one of the 23 exemptions.
Key exemptions likely to exclude many companies from the BOI Report include exemptions for the following types of entities:
- Large operating companies, which the Reporting Rule defines to include any company that employs more than 20 full-time employees in the US, has more than $5,000,000 in gross receipts or sales in the US, and has an operating presence at a physical office within the US.
- Public companies, based on the BOI rule definition of a “securities reporting issuer.”
- Certain types of regulated entities, such as insurance companies, banks and credit unions, brokers or dealers in securities, and money services businesses (MSBs).
- Entities involved in private equity and venture capital – specifically, investment companies, investment advisers, pooled investment vehicles and venture capital fund advisers – subject to certain criteria.
- Subsidiaries of certain exempt entities, including larger operating companies, public companies, regulated entities such as banks (but not MSBs), and the exempt private equity and venture capital entities, are also exempt from BOI reporting, provided in each case that the subsidiary’s ownership interests are controlled, or wholly owned, directly or indirectly, by the exempt entity.
Despite the number of the exemptions, most privately held businesses are not exempt.
What information needs to be reported:
A reporting company must submit a BOI Report to FinCEN that includes three types of information:
- Company information, such as full legal name (and any trade names), address, jurisdiction of formation, and taxpayer identification number (or equivalent issued by a foreign jurisdiction).
- Beneficial owner information, including the full legal name, date of birth, address, and the unique identifying number and image of a US passport, state driver’s license, or other eligible identification document for each individual identified as a beneficial owner.
- Company applicant information, for companies created or registered on or after January 1, 2024, which is the same information required to be provided for beneficial owners.
A reporting company must file an updated BOI Report to communicate changes to company or beneficial owner information (including the beneficial owners’ identities and previously submitted information for them) no later than 30 days after the date on which the change occurred. Companies are not otherwise required to submit BOI Reports on an annual or other periodic basis as a matter of course.
Who is a “beneficial owner”?
A beneficial owner is any individual who meets at least one of two criteria: (1) the individual exercises substantial control over the reporting company; or (2) the individual owns or controls at least 25 percent of the ownership interests of a reporting company.
The reporting rule describes four categories of “substantial control”:
- The individual is a senior officer (e.g., CEO, chief financial officer, general counsel).
- The individual has authority to unilaterally appoint or remove any such senior officer or a majority of the board of directors of the reporting company.
- The individual directs, determines or has substantial influence over important decisions made by the reporting company.
- The individual has any other form of substantial control over the reporting company.
Exceptions to the term “beneficial owner” are minor children, individuals acting as a nominee, intermediary, custodian, or agent on behalf of another individual, employees of a reporting company (acting solely as an employee), individuals whose only interest in a reporting company is a future interest through a right of inheritance, and creditors of a reporting company.
Where do I get the form?
If you would like to file the Beneficial Ownership Information Report yourself, you can go to the FinCEN website and either file completely online or download and fill out the pdf form and upload it directly on their website. The link for both forms is here for your convenience: https://boiefiling.fincen.gov/fileboir
How Cummins & White can help:
We are here to provide guidance on exemptions and who is a beneficial owner of your company. We are also here to prepare or review reports to ensure full compliance and help you apply for a FinCen identifier to make the reporting process easier if you own multiple entities.
Please contact us at your earliest convenience, so we may assist. Ashley Bolduc (abolduc@cwlawyers.com)
