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The Essential Guide for Business Owners: Gathering Documents for Beneficial Ownership Information Filing with FinCEN for your attorney

Beneficial Ownership Information Reports are required for most small businesses

If you are an owner, officer, or decision maker at any one of the 32 million active small businesses in the U.S., you will need complete a Beneficial Ownership Information Report (BOI report) filing in 2024. It’s best to be prepared early, gather your documents, and hire a specialized law firm to prepare for your initial FinCEN report.

Beneficial Ownership Information (BOI) reports have become a required filing for small businesses following the enactment of the Corporate Transparency Act (CTA). This legislation was passed to bolster national security, intelligence, and law enforcement efforts in combating money laundering, terrorist financing, and other illicit activities that misuse anonymous U.S. companies. Primarily affecting smaller, unregulated companies, the Corporate Transparency Act mandates that nearly all U.S. small businesses disclose beneficial ownership details to the Financial Crimes Enforcement Network (FinCEN), a branch of the U.S. Department of the Treasury. The required information includes the identities of individuals who ultimately own or control the company, as well as those responsible for its formation. From 2024 onwards, BOI reports will be as compulsory as tax returns. The U.S. Department of the Treasury, which supervises both the IRS and FinCEN, enforces these filing requirements.

Does my company need to file a beneficial ownership report to FinCEN?

Your small business will likely have to file a BOI report if it is registered in any U.S. state. Companies with over 20 full-time employees and revenues in excess of $5M are considered “large operating entities” and exempt from filing. Businesses that do not meet both the employee and revenue thresholds are considered a “reporting company” under the new law and must file a BOI report. 

Many larger entities will also need to file a report due to the structure of these exemptions. For example, a large investment company or venture capital fund may have 25 employees and collect and invest $50M in capital over the course of a year, but because this type of company does not generate sales revenue, it will need to file a report. 

Some other exemptions exist for rare company types that typically already register with specific industry regulators. To check your company and view all exemptions, you can use our check my company tool.

Unless your company is exempt from reporting, you will need to provide information about your company and each beneficial owner on your beneficial ownership report. Due to the many complexities of this regulation, we advise business owners to consider hiring a firm that is specialized in these filings.

These firms can complete all of the following tasks for your business.

  1. Determine if your company is exempt or needs to file.
  2. Determine who is a beneficial owner of your business.
  3. Collect the necessary documents for your beneficial ownership report.
  4. Prepare and file your beneficial ownership report to FinCEN.
  5. Monitor your company’s compliance with the CTA and file updated reports when legally required.

You can also find specialized firms to help you file using our find a firm tool.

What information do I need for my beneficial ownership information report?

Whether you are gathering documents for your attorney or preparing to file your own report, it helps to be ready and gather everything you need prior to 2024. 

First, you will need to make a list of all “beneficial owners” of your business. Beneficial owners, as defined under the new regulations, are individuals who either of the following criteria (1) directly or indirectly hold 25 percent or more of the company’s “ownership interests” or (2) exercise “substantial control” over the reporting company, either directly or indirectly. It is crucial to understand that beneficial owners include not only legal entity owners but also those who significantly contribute to the entity’s operation without holding equity.

An individual can hold 25% or more of a company’s total ownership interests through various means, such as equity, stocks, or similar instruments, as well as capital or profit interests in an entity. Convertible instruments, futures, warrants, and rights to buy, sell, or subscribe to shares or interests also count as ownership interests. Additionally, options or privileges associated with buying or selling the previously mentioned items, along with any other mechanisms used to establish ownership, are considered. Note that beneficial owners must be individuals; if a husband and wife jointly own a limited liability company that holds 25% of a reporting company’s ownership interests, both spouses should be listed as beneficial owners on the BOI report, not the limited liability company.

An individual is also deemed a beneficial owner if they have “substantial control” over a reporting company by wielding significant power to shape the company’s decisions. This can involve directing, determining, or substantially influencing critical company decisions. Typically, senior officers, such as CEOs or high-level managers, are considered to have substantial control over a company and should be included in the list of beneficial owners. Other rights or responsibilities may also contribute to substantial control. To cover all bases, FinCEN has incorporated a catch-all provision that encompasses any other form of substantial control exercised directly or indirectly. For instance, if a family member not officially listed on a company directs certain decisions, they should be included in the BOI report as having substantial control over the reporting company.

Second, you need to collect the appropriate information about your company and each beneficial owner.

All Reporting Companies must provide the following information:

  1. The business entity name (including any alternative trade or “doing business as” names)
  2. Address where primary business operations occur. This cannot be a registered agent address or other addresses where business owners do not typically perform work.
  3. Jurisdiction of formation or registration where your company was registered and information about the registration, such as the registration date.
  4. Your company’s FEIN. If you do not have an FEIN for your entity, you will need to obtain one prior to filing.

You must also collect the following information from each beneficial owner:

  1. The full legal name of the beneficial owner.
  2. Date of birth of the beneficial owner.
  3. Current residential address. This can be a U.S. or foreign address. 
  4. A unique identifying number from an acceptable identification document (such as a State-issued ID or passport), along with an image of the document.

When Do I Need to File My Beneficial Ownership Report?

Beneficial ownership report filing takes effect on January 1, 2024. Companies created before this date have until the end of 2024 to submit the necessary information about their beneficial owners. Companies formed or registered on or after January 1, 2024, must provide the required information within 30 days of receiving the formation or registration notice. 

If there are any changes to previously reported information about a reporting company or its beneficial owners, this must be reported to FinCEN within 30 days of the change. Any inaccuracies discovered must be reported within 30 days. Keep in mind that a change in an entity’s ownership may necessitate filing or updating a BOI report, even if the entity was not a Reporting Company before the change.

Consider hiring a corporate transparency act attorney 

Starting in 2024, most small businesses in the U.S. will be required to disclose identifying information about those who own or control their entity to deter money laundering, corruption, tax evasion, and other financial crimes. 

Navigating the BOI reporting requirements can be overwhelming for business owners, especially given that a thorough understanding of the process entails reading over 100 pages of detailed FinCEN rules and documentation across separate documents. 

Just as you would rely on an accountant for complex tax filings, it’s worth considering engaging an attorney’s expertise to avoid the time burden and potential penalties associated with non-compliance. The risks are too high to ignore, with daily civil penalties of $500 for ongoing violations, fines up to $10,000, and imprisonment for up to two years – or even a combination of these penalties that can impact your business’s future. 

By hiring an affordable specialized attorney, you can minimize the risk of costly mistakes and safeguard your company, finances, and time. The complexity of the law and the sheer volume of information required for compliance necessitates professional guidance, and the peace of mind you’ll gain is invaluable. You can find cost-effective CTA attorneys in your state here.

Charles Wismer

Charles Wismer

Charles is a fund manager and finance industry specialist with ten years of experience managing complex corporate structures in finance and fintech. His expertise concentrates on deploying and scaling novel solutions for new technologies and regulations.

Charles Wismer

Charles Wismer

Charles is a fund manager and finance industry specialist with ten years of experience managing complex corporate structures in finance and fintech. His expertise concentrates on deploying and scaling novel solutions for new technologies and regulations.

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