A Summary for Clients
TL; DR
Please consult your attorney regarding Beneficial Ownership Information Reporting under the CTA. The summary below is provided as a general overview and should not be construed as legal advice.
New law (CTA) requires most existing LLCs, corporations and other entities to file beneficial ownership reports with FinCen no later than January 1, 2025. New entities formed in 2024 or later have a 90 day deadline to file initial reports. Any changes in beneficial ownership or corrections must be updated within 30 days of change / filing. Significant penalties for non-compliance apply.
BOI E-Filing can be completed at: https://boiefiling.fincen.gov/fileboir (Web Option > Prepare and Submit). Please have:
- Company Legal Name, physical address and EIN Ready
- All beneficial owners’ full names, dates of birth, and residential addresses. Spouses are generally considered beneficial owners.
- A copy (image) of all beneficial owners’ state IDs or passports
- Entities existing prior to January 1, 2024 will check “Existing Reporting Company” under Company Applicants section
*Be sure to print/save transcript to your files after filing and keep for your records*
Entities Subject to CTA Reporting Requirements:
- Scope: Corporations, LLCs, and similar entities created by a filing with a Secretary of State or equivalent, including non-U.S. companies registered in the U.S.
- Exemptions: Entities already regulated and disclosing beneficial ownership to governmental authorities, and "large operating companies" meeting specific criteria:
- Employ at least 20 full-time employees in the U.S.
- Gross revenue over $5 million on the previous year's tax return.
- Operating presence at a physical office in the U.S.
- Note: Exemptions are detailed and may vary based on state laws.
Definition of "Beneficial Owner":
- An individual with “substantial control” or owning/controlling at least 25% of a Reporting Company’s interests.
- “Substantial control” includes:
- Senior officers.
- Authority over senior officers or the board.
- Significant influence over major decisions.
- Control can be direct or indirect, e.g., through board representation or intermediary entities.
- Spouses, particularly in community property states, are also considered beneficial owners if their spouse falls under the definition of a beneficial owner.
- Important: The CTA's definition of “substantial control” is broader than traditional ownership assessments; legal guidance may be necessary to identify beneficial owners.
Information to be Reported:
- For each beneficial owner:
- Name, date of birth, residential address.
- Identifying number from a valid ID (passport, driver’s license, etc.).
- Image of the identification document.
- Filing Method: Online via the Beneficial Ownership Information Report (BOIR) form
Reporting for Company Applicants:
- Only required for new Reporting Companies formed or registered on or after January 1, 2024.
Deadlines for Compliance:
- New Companies: Report within 90 days after formation/registration.
- Existing Companies: Report by January 1, 2025.
- Updates: Within 30 days of any change.
- Corrections: Within 30 days upon discovery of inaccuracies.
Penalties for Noncompliance:
- Severe penalties include:
- Civil fines of up to $500 per day until resolved.
- Criminal fines up to $10,000.
- Imprisonment of up to two years.
- Safe Harbor: Corrected reports filed within 90 days of an inaccurate report submission may avoid penalties.
Final Note: Due to the complexity and evolving nature of the CTA requirements, it is advisable for companies to stay informed and consult legal professionals for compliance. For detailed information and updates, visit FinCEN.gov.
Seghetti Waxler is currently awaiting guidance from California and our insurance companies to determine if assistance with filing Beneficial Ownership Reporting will be considered Unauthorized Practice of Law. We will follow with guidance as we learn more.