In compliance with new regulations outlined in the Corporate Transparency Act (CTA), numerous corporations, limited liability companies, and other entities are now mandated to disclose beneficial ownership and pertinent information to the Financial Crimes Enforcement Network (FinCEN). But what’s this all about?

The newness of the requirement is compelling many businesses to turn to Propel’s specialists in entity formation and registration to ensure timely adherence to the CTA’s updated reporting obligations. We’re here to help! Let’s talk through some of the most common questions facing businesses now that BOI reporting to FinCEN is mandated.

Why am I just learning about BOI reporting?

First, some background. The CTA, integrated within the Anti-Money Laundering Act as part of the 2021 National Defense Authorization Act, aims to combat money laundering, terrorism financing, organized crime, and related financial offenses. It necessitates that numerous corporations, LLCs, and other entities established or registered in the U.S. promptly report details about their beneficial owners and decision-makers to FinCEN.

Empowering FinCEN, the CTA establishes a centralized, nonpublic database of beneficial ownership information (BOI) accessible to law enforcement, national security entities, and financial institutions. As the name implies, a BOI report generally provides details about the owner(s) and individuals who control any given company. While the law was passed in 2021, the BOI reporting requirements are effective as of January 1, 2024.

What companies are required to report beneficial ownership information (BOI)?

Entities categorized as “reporting companies” are obliged to submit BOI reports to FinCEN within specified timelines – we’ve outlined those timelines below. There are two classifications of reporting companies: domestic and foreign. Domestic reporting companies encompass corporations, LLCs, and other entities formed through filing with a secretary of state or analogous authority or Indian tribe. Foreign reporting companies include entities established under foreign law but registered to conduct business within any U.S. state or tribal jurisdiction.

There are, of course, many exemptions from BOI reporting requirements (over 20!) for specific entity types, many of which are already subject to substantial regulation by federal or state agencies. Propel can help determine whether your specific business or organization falls under the scope of the new requirements. It’s important to note: BOI reporting is completely unrelated and separate to tax filings – both must be completed accurately and timely.

Who is a beneficial owner?

Under the Corporate Transparency Act (CTA), ownership includes those that own 25% or more of a company across various types of interests such as equity, stock, or voting rights. Those folks, as well as individuals who directly or indirectly exert significant control over a reporting company, are required to disclose their involvement. This includes stockholders, partners, LLC members, and owners of a business that owns another business that is subject to BOI reporting. This could mean someone who:

• Holds a senior officer position or serves as a key decision-maker.
• Possesses authority to appoint or dismiss certain officers or a majority of directors.
• Exercises any other form of substantial control over the company.

While many beneficial owners will be readily apparent, some may not be. If you’re not sure who your company’s beneficial owners are, or whether you’re neglecting to identify anyone with substantial interest, ask Propel! We’re specialists in reviewing businesses with complex capital and governance structures, as well as those with indirect interest holdings through multiple entity tiers or trusts. We can help you identify and report accurately, so that your business is in full compliance with the new regulations.

When is the deadline for reporting my company’s BOI?

The short answer? It depends on when your business was formed or registered. The BOI reporting rules are effective January 1, 2024, and have dynamic due dates.

• If your business was formed or registered between January 1, 2024, and January 1, 2025, you must file initial BOI reports within 90 calendar days of receiving notice of the company’s creation or registration.
• If your business will be formed or registered after January 1, 2025, you will have 30 calendar days for initial BOI reporting.
• If your business was formed or registered before January 1, 2024, you have until January 1, 2025, to file the initial BOI report.

Subsequent updates must be filed within 30 days of any changes in BOI, say, if your business changes hands or a new entity acquires a controlling interest.

Where can I go for help reporting BOI?

Failure to comply with the CTA or any FinCEN regulations may result in significant penalties. If you don’t feel comfortable navigating the complex BOI reporting framework, including interpretations of CTA provisions and related legal documents, Propel can help. Simply say hello and our team of experts will guide you through the process.