Guide to Beneficial Ownership Information Reporting
Chris Barrett
Introduction
Beneficial Ownership Information Reporting begins January 1, 2024 and most companies in the United States will need to report information about the owner’s and leaders of the organization. These people are referred to as beneficial owners. This information must be reported to the Financial Crimes Enforcement Network (FinCEN).
In this guide we will walk through what Beneficial Ownership Information Reporting is, who needs to report, and how to go about doing so.
Who Needs to Report?
The Reporting Rule breaks reporting companies down into 2 categories:
- Domestic Reporting Company
- Foreign Reporting Company
So long as the company does not meet one of the 23 exceptions listed below they will be required to file a Beneficial Ownership Report with FinCEN.
Exemptions from Reporting
There are twenty-three specific types of entities that are exempt from reporting. These exemptions cover a range of entities, including certain financial institutions, public utilities, and entities that are already subject to specific types of federal regulation.
Below is the full list of specific exceptions from Beneficial Ownership Reporting Requirements:
- Securities Reporting Issuer
- Governmental Authority
- Bank
- Credit Union
- Depository Institution Holding Company
- Money Services Business
- Broker or Dealer in Securities
- Securities Exchange or Clearing Agency
- Other Exchange Act Registered Entity
- Investment Company or Investment Adviser
- Venture Capital Fund Adviser
- Insurance Company
- State-Licensed Insurance Producer
- Commodity Exchange Act Registered Entity
- Accounting Firm
- Public Utility
- Financial Market Utility
- Pooled Investment Vehicle
- Tax-Exempt Entity
- Entity Assisting a Tax-Exempt Entity
- Large Operating Company
- Subsidiary of Certain Exempt Entities
- Inactive Entity
Who is Considered a Beneficial Owner?
A beneficial owner is any individual who either directly or indirectly has either substantial control over a reporting company or owns at least 25% of the ownership interests of a reporting company.
There are cases where there could be multiple beneficial owners and in those cases all beneficial owners will need to report.
What is substantial control?
Substantial control can be reached if the individual meats any of the 4 following criteria.
- Senior officer
- Has authority to appoint or remove certain officers or directors
- Important decision-maker
- Any other substantial control over the reporting company
Filing Timeline
Entities formed or registered before January 1, 2024, have until January 1, 2025, to file their initial reports.
Entities formed or registered between January 1, 2024, and January 1, 2025, have 90 calendar days after notice of their formation or registration to file.
Entities formed or registered on or after January 1, 2025, have 30 calendar days from notice of their formation or registration to file.
Penalties for Non-Compliance
Failure to report, or providing false or fraudulent information, can result in significant civil and criminal penalties. Civil penalties can amount to up to $500 for each day the violation continues, and criminal penalties can include imprisonment for up to two years and fines up to $10,000. Senior officers of an entity that fails to file a required BOI report may also be held accountable.
How to File
You have 2 overarching options for filing your Beneficial Ownership Information Report.
- You can do it yourself on the FinCEN website
- You can hire someone else to do it
For your convenience Midwest CPA is partnering with FileForms that you can utilize to file with FinCEN on your behalf. You can access their site here. We do get a referral should you utilize this link.
Alternatively, you could find a local attorney to help you with the filing.
Have more Questions?
If you have more questions reach out to a professional at Midwest CPA.
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Disclaimer
The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting, or investment advice. You should consult a qualified legal or tax professional regarding your specific situation.
