Beneficial Ownership Reporting Rules: What You Need to Know and Do

New beneficial ownership reporting rules have been implemented to combat financial crime and enhance transparency in business ownership. If your company doesn’t meet one of the exceptions to filing Beneficial Ownership Information (BOI), these new regulations, stemming from the Corporate Transparency Act, represent a significant shift in how businesses must disclose ownership structures. Let's break down what these rules mean, how to comply, and where to find the support you need.

What is Beneficial Ownership Reporting?

On January 1, 2024, new entity reporting rules came into effect, requiring disclosure of beneficial owners to the Financial Crimes Enforcement Network (FinCEN).

Entities that do not fall under one of the 23 exempt categories must report beneficial ownership information to FinCEN, providing details about:

1. Beneficial Owners: Individuals who directly or indirectly exercise substantial control over a reporting company or own at least 25% of its ownership interests.

2. Company Applicants: People who register the entity (for those formed on or after January 1, 2024).

For each beneficial owner, businesses must report the individual's name, date of birth, address, and a copy of a government-issued ID, such as a driver’s license or passport.

How to File a FinCEN BOI Report

Step 1: Determine if Your Business Needs to Report

Generally, any entity registered with a state’s Secretary of State must file unless they meet specific exemptions. Notably, entities classified as ‘large operating companies’ may be exempt if they meet all three criteria:

• Over 20 full-time employees in the U.S.
• Over $5 million in gross receipts (as per the prior year’s federal tax return)
• Physical operating presence in the U.S.

Entities such as banks, insurance companies, and tax-exempt organizations are also among those exempt.

Step 2: Gather the Required Information

You’ll need to gather specific details for each beneficial owner:

• Name, date of birth, address
• Government-issued ID copy

For new businesses established in 2024, this information is also required for company applicants.

Step 3: File Your Report

Reports can be filed electronically through the FinCEN website. The timing depends on when your business was established:

• Existing companies (before January 1, 2024): File by January 1, 2025.
• New companies (after January 1, 2024): File within 90 calendar days of entity registration. After January 1, 2025, this will be reduced to 30 days.
• Ownership Changes: Substantial changes, such as a new beneficial owner with over 25% equity, must be reported within 30 days .

What If You Miss the Deadline?

FinCEN allows for a 30-day grace period for voluntary corrections. However, willful non-compliance can lead to penalties, including daily fines, significant monetary penalties and even criminal charges.

BOI Filing Requirements for Complex Ownership Structures

If your business has a complex ownership structure—such as a tiered partnership or trust—determining who qualifies as a beneficial owner can be challenging. KGOB’s experienced team can provide guidance, helping you identify all reportable beneficial owners and ensuring accurate compliance.

Update: Preliminary Injunction on BOI Filing Requirement

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction halting enforcement of the Corporate Transparency Act (CTA). In response, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) announced it will comply with the injunction while appealing the decision. FinCEN’s website confirms that reporting companies are not currently required to file Beneficial Ownership Information (BOI) reports during the injunction, and no penalties will accrue for failure to file during this time.

While BOI filing is voluntary for now, we encourage businesses to consider the potential implications of this injunction:

• Uncertainty Around the Injunction: The injunction may be lifted at any time, potentially leaving filers with a limited window to submit their reports before penalties are enforced.
• Prepare for Compliance: If you choose not to file at this time, it’s important to gather and organize your BOI information so you are ready to file quickly if the requirement is reinstated.
• Benefits of Filing Now: For businesses without significant privacy concerns, filing now may reduce stress later and ensure compliance no matter the outcome of the lawsuit.

For entities formed in 2024 with specific filing deadlines other than December 31, we recommend closely monitoring the situation. While FinCEN may extend deadlines in these cases, penalties for late filings remain significant, and the timeline for compliance is uncertain.

Our BOI compliance service can help you stay prepared and ensure your filings are handled efficiently, regardless of the current status of the injunction. We provide the support you need to remain proactive in your compliance efforts.

If you have questions about your filing obligations or want to proceed with a voluntary filing, we’re here to help. Don’t hesitate to reach out.

Why Trust KGOB?

At KGOB, we invest our resources into staying up-to-date on the latest regulations to help our clients navigate compliance confidently. If your business is subject to the beneficial ownership reporting requirements, we’re here to assist you every step of the way.

For more detailed information, visit FinCEN’s official website, which provides comprehensive guidance and FAQs on BOI reporting.

Need additional support or have questions? Contact us at KGOB today – we’re always here to help!