Corporate Transparency ACT and the Beneficial Ownership Information
Starting January 1, 2024, a new mandate will require millions of businesses to submit a Beneficial Ownership Information (BOI) Report to the Financial Crimes Enforcement Network (FinCEN) within the U.S. Department of the Treasury. What does this mean for Collective members? Let's break it down.
Can you give me a short rundown of what's going on?
The BOI report must detail the beneficial owners of the company, who are individuals with substantial control or at least 25% ownership. Reporting companies include corporations, LLCs, and similar entities in the U.S. Most Collective members will need to file this report unless they qualify for an exemption, which is unlikely.
Initial reports for existing companies are due by January 1, 2025, and within 90 days of formation or registration for new companies after January 1, 2024. The BOI report requires detailed information about the company and its beneficial owners, including personal identification details.
The BOI is not public but accessible to authorized government and financial entities for regulatory purposes. Updates to the BOI must be filed within 30 days of any changes.
What is the Corporate Transparency ACT?
The Corporate Transparency Act is legislation passed by Congress in 2021 that goes into effect on January 1, 2024.
This initiative is part of the U.S. government's broader strategy to prevent individuals engaged in illicit activities from concealing their involvement or gaining from such activities through entities like shell companies or complex ownership structures. It establishes a reporting mandate for disclosing beneficial ownership information, so it's important that you stay informed and comply with this new reporting requirement.
Who is considered a Beneficial Owner?
A beneficial owner is an individual who, directly or indirectly, either has substantial control over a reporting company or owns/controls at least 25% of its ownership interests. This status can be achieved through substantial control, ownership interests, or a combination of both.
Reporting companies don't need to specify the reason for an individual's beneficial owner status. A reporting company can have multiple beneficial owners, and there is no limit to the number of beneficial owners that must be reported.
There are five exceptions to the definition of beneficial owner: minor child, employee, inheritor, creditor, and intermediary.
What is a Reporting Company?
Reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
Do Collective Members need to file a Beneficial Ownership information report?
Most likely, yes. Companies are required to report if they meet the Reporting Rule’s definition of a “reporting company” and do not qualify for an exemption. There are currently 23 types of entities that are exempt from the reporting requirements, though these are typically limited to heavily regulated entities such as publicly traded companies and other entities that file reports with the SEC. As a Collective member, you’ll likely fall outside of these exemptions.
When do I need to report my company’s beneficial ownership information to FinCEN?
A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial beneficial ownership information report. A reporting company created or registered on or after January 1, 2024, will have 90 days to file its initial beneficial ownership information report.
This 90-day timeline starts the day a company receives actual notice of its creation, that its registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier. No report will be accepted prior to January 1, 2024.
What information does the report require?
There are several items of information requested on the BOI report. This includes general company details, beneficial owner information, and the company applicant.
A beneficial owner is an individual who, directly or indirectly, either exercises substantial control over the reporting company or owns or controls at least 25 percent of its ownership interests. The BOI report should include the beneficial owner(s):
Full legal name
Date of birth
Complete, current residential street address
Identification number along with issuing jurisdiction (from U.S. passport, state/local ID, driver's license, or foreign passport)
An image of the document containing the identification number
The report must also include the reporting company’s:
Full legal business name
Any trade or "doing business as" names
Complete the current street address of the principal place of business
Jurisdiction of Formation
Taxpayer identification number
Lastly, reporting companies created or registered on or after January 1, 2024, will need to report their company applicant. The company applicant is the individual who directly files the document that creates or registers the company, as well as the person primarily responsible for directing or controlling the filing when multiple individuals are involved.
For each individual who is a company applicant, a reporting company will have to provide:
The individual’s name
Date of birth
Address
Identification number along with issuing jurisdiction (from U.S. passport, state/local ID, driver's license, or foreign passport)
An image of the document containing the identification number
Is the BOI available to the public?
The general public will not have access to the BOI report. FinCEN will allow authorized government officials (including foreign officials through a U.S. federal agency) access to beneficial ownership data for national security, intelligence and law enforcement purposes. Financial institutions and their regulators may access this information with the company's consent and for regulatory supervision.
How often does the BOI need to be filed?
Reporting companies registered before January 1, 2024, will have a full year to file the BOI report. Reporting companies on or after January 1, 2024, will have 90 days to file the report.
After the initial BOI report filing, you’ll need to resubmit an updated filing within 30 days of a change to the reported information related to either a beneficial owner or the reporting company.
My report was instantly rejected. What can I do?
Most Collective members who have their reports rejected instantly are experiencing this due to the filename they use while uploading the proof of identification. Rename your file with only alphanumeric characters and no spaces, and try to resubmit.
If you still are experiencing errors, let our team know so we can help triage.
I’m an S Corp. Do I still need to do this?
While you’re taxed as an S Corp, your legal business structure is an LLC. The FinCEN BOI Report is required of all LLCs, regardless of taxation status.
Where can I learn more about this requirement?
FinCEN has provided two resources that you can check out for more info: the Small Entity Compliance Guide and Frequently Asked Questions
Can I see a walk-through on how to file?
Click here to see a walk-through on how to file!