The Financial Crimes Enforcement Network (FinCEN) Beneficial Ownership Information (BOI) filing requirement is a critical compliance obligation for many businesses in the United States. As part of the broader effort to combat money laundering, terrorism financing, and other illicit financial activities, this requirement aims to increase transparency around the actual owners of entities operating within the country. Here's a detailed guide covering the background, who is required to file, and when the filing is due. The Dohrwardt Law Firm offers a flat fee service to help you manage your FinCEN BOI filing, including tracking your filing status and any required renewals. Contact the Dohrwardt Law Firm today for guidance.

Background on the FinCEN BOI Requirement

The BOI filing requirement stems from the Corporate Transparency Act (CTA), enacted on January 1, 2021, as part of the National Defense Authorization Act for Fiscal Year 2021. The CTA mandates that certain businesses report their beneficial ownership information to FinCEN, a bureau of the U.S. Department of the Treasury. The primary goal of this legislation is to create a centralized database of beneficial ownership information that law enforcement and other agencies can use to detect and prevent financial crimes.

Before the CTA, the U.S. was criticized for lacking sufficient transparency regarding entity ownership, which allowed bad actors to exploit anonymous entities for illegal purposes. The BOI filing requirement addresses these concerns by mandating detailed reporting of the individuals who own or control companies, thereby closing loopholes and increasing accountability.

Who is Required to File?

Under the CTA, a “reporting company” must submit beneficial ownership information to FinCEN. A reporting company is broadly defined to include most domestic and foreign entities created or registered to do business in the United States, including corporations, limited liability companies (LLCs), and other similar entities. However, the law also provides for several exemptions.

Exempt Entities

Certain entities are exempt from the BOI filing requirement due to their nature, size, or existing regulatory obligations. These include:

• Publicly traded companies: Entities already subject to SEC reporting requirements.
• Large operating companies: Entities that employ more than 20 full-time employees, have a physical office in the U.S., and report over $5 million in gross receipts or sales.
• Certain regulated entities, Such as banks, credit unions, insurance companies, registered investment advisers, and broker-dealers, are already subject to federal regulation and reporting.
• Inactive entities: Entities that have existed for over a year, have no current operations or assets, and have not been involved in business for a specified period.

Who Qualifies as a Beneficial Owner?

A beneficial owner is any individual who, directly or indirectly:

• Owns or controls 25% or more of the entity's ownership interests.
• Exercises substantial control over the entity, including senior officers or others who significantly influence vital decisions.
• Beneficial owners must be reported along with detailed identifying information, including:
  • Full legal name
  • Date of birth
  • Address
  • A unique identification number from a government-issued document, such as a passport or driver's license.

When is the Filing Due?

The deadlines for filing BOI reports vary depending on whether the entity is newly formed or already existing:

• Existing entities (those created or registered before January 1, 2024) will have until January 1, 2025, to file their initial BOI report.
• Newly formed entities (those created or registered on or after January 1, 2024) must file their initial BOI report within 30 days of their formation or registration.
• Entities must also update their BOI reports within 30 days of any change in beneficial ownership or other reported information, ensuring that FinCEN's database remains accurate and current.

Penalties for Non-Compliance

Failure to comply with the BOI filing requirements can result in significant penalties, including:

• Civil penalties of up to $500 per day for each day that the violation continues.
• Criminal penalties include fines up to $10,000 and imprisonment for up to two years for willful violations.

These stringent penalties underscore the importance of understanding and adhering to the BOI filing requirements.

Practical Steps for Compliance

To ensure compliance with the FinCEN BOI filing requirement, businesses should:

1. Identify beneficial owners: Determine who meets the criteria for beneficial ownership.
2. Collect required information: Gather the necessary details for each beneficial owner, ensuring accuracy and completeness.
3. Submit the BOI report: File the report with FinCEN through the designated electronic filing system.
4. Monitor changes: Implement processes to monitor and promptly report any changes in beneficial ownership.

Conclusion

The FinCEN BOI filing requirement represents a significant shift toward greater transparency in U.S. corporate ownership. By understanding the requirements, identifying who must file, and adhering to the filing deadlines, businesses can avoid costly penalties and contribute to the broader effort to combat financial crimes. Consulting with a legal professional experienced in compliance matters is highly recommended for those who need clarification on their obligations. Staying proactive and prepared will ensure your business remains on the right side of these new regulations, protecting your operations and supporting the financial system's integrity.

The Dohrwardt Law Firm offers a flat fee service to manage your FinCEN BOI filing. Contact the Dohrwardt Law Firm today for guidance.