Your Guide to Beneficial Ownership Information Reporting

Editor's note: This requirement is currently being worked out in court.

In 2021, US Congress passed the Corporate Transparency Act (CTA), which requires businesses to report clearly who owns or benefits from the business by filing Beneficial Ownership Information (BOI).

The CTA went into effect on January 1, 2024, and most eCommerce businesses will need to file BOI by the end of this year or sooner. Read on to learn more about the CTA, BOI, and how to stay compliant.

Why Do We Have the Corporate Transparency Act?

The CTA creates a new beneficial ownership information reporting requirement that makes it more difficult for bad actors to work in the background through shell companies or other ownership structures where their identity can be obscured.

Who Has to File?

I recommend you review the information on the www.Fincen.gov/boi website. There is great information on this page. Generally, it indicates that your company may need to report information about its beneficial owners if it is

1. a corporation, a limited liability company (LLC), or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe

2. a foreign company and registered to do business in any US state or Indian tribe by such a filing.

This general guidance is also accompanied by 23 types of entities exempt from reporting. Unfortunately, the exemptions apply to banking and financial service type entities so most eCommerce businesses will have to comply. You can learn more from this Small Entity Compliance Guide. Page one of the document has a decision tree to help you consider your requirements and page four has a list of the exemptions.

If you are required to report, then you will file electronically using FinCEN's BOI E-Filing website.

What is a Beneficial Owner?

A beneficial owner is any individual who, directly or indirectly exercises substantial control over a reporting company OR owns or controls at least 25% of the ownership interests of a reporting company.

A reporting company can have more than one beneficial owner; there is no maximum number. On page 16 of the guide, you can dive into the definitions of substantial control, ownership interest, and a three-step process for how you can identify your company's beneficial owners.

Government Alphabet

FINCEN - The Financial Crimes Enforcement Network, under the US Treasury Department, is responsible for the reporting process.

CTA - The Corporate Transparency Act, which Congress passed in 2021.

BOI - Beneficial Ownership Information refers to information about the individuals who directly or indirectly own or control a company and is the title of the reporting requirement under the CTA.

What Beneficial Ownership Information Will I Report?

You will need all the details of your business - full legal name, doing business as (DBA) name, address, and Taxpayer ID Number or Employer ID Number. For each beneficial owner, you will need the full legal name, date of birth, current address, and a unique identifying number like a US Passport, state driver's license, or an ID document issued by the state, local government, or tribe. Page 38 of the guide gives you a complete checklist.

When Do I Need to File?

If your business was established before January 1, 2024, and you meet the criteria, you have until the end of 2024 to file. Any business that meets the criteria and was established after January 1, 2024, has 90 days to file its Beneficial Ownership Information document. Note that in 2025, the reporting requirements change.

I suggest while you're already in "compliance" mode preparing your taxes this spring, you deal with the BOI requirements. Don't leave it until Q4 when your focus turns to sales.

Consequences of Failure to Report the BOI

"The willful failure to report complete or updated beneficial ownership information to FinCEN…. may result in civil or criminal penalties, including civil penalties up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fail to file a required BOI report may be held accountable for that failure.”

Tackle Your Compliance Tasks

I know that CTA, BOI, and FinCEN are new acronyms for many of us this year. While you're already working on the tax filing to the IRS, why not tackle this compliance chore too? The penalties are too steep to ignore. This blog is a simplified discussion to help you understand the key components. Dive into the resources provided by FinCEN above and make sure you know what is required of you.

If you’re ready to get your finances cleaned up so you are all prepped and ready when tax season rolls around next year, reach out to the bookskeep team today!