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Beneficial Ownership Information Filing Mandatory in 2024

Starting on January 1, 2024, BOI reports must be filed electronically using FinCEN’s secure filing system for certain businesses and non-profits

The Southern Ocean Chamber is alerting members and coastal businesses to the implementation of the Corporate Transparency Act (CTA) as of January 1, 2024, requiring certain privately held companies, known as “reporting companies,” to file a Beneficial Ownership Information (BOI) Report to identify, and provide personal information about, their direct and indirect owners to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). The new rules were established to help FinCEN combat financial crimes, including money laundering, tax evasion, terrorist financing, and other corrupt financing activities. A “reporting company” is defined as a domestic or foreign corporation, limited liability company, or other entity that is created by the filing of a document with a secretary of state or any similar office under the law of a state or Native American tribe. These companies in existence as of January 1, 2024, will have until January 1, 2025, to file an initial BOI Report. Reporting companies formed on or after January 1, 2024, must file an initial BOI Report within 30 [1] days of formation. FinCEN will store the BOI Reports in a non-public database, accessible only in connection with authorized government activities related to national security, taxes, or law enforcement.

What is the BOI Report?

 The BOI Report will include basic information about the reporting company, such as its full legal name and any trade name or “doing business as” name, its physical address, its jurisdiction of formation or registration, and its IRS taxpayer identification number. In addition, the reporting company must (a) identify its “beneficial owners” and, for reporting companies formed on or after January 1, 2024, “company applicants” and (b) provide personal information about each individual it identifies. A “beneficial owner” is any individual who, directly or indirectly, exercises “substantial control” over, or owns or controls at least 25 percent of the ownership interest of, a reporting company. An individual may be a beneficial owner by virtue of their control over the company, ownership interests, or both. An individual’s ownership percentage takes into consideration direct and indirect ownership, as well as control over interests in the reporting company. An individual may have “substantial control” if they are a senior officer, have authority to appoint or remove officers or directors, make important business decisions, or otherwise have substantial control over the reporting company. Failure to submit a report, can lead to both civil and criminal penalties for noncompliance. Individuals and entities can be assessed a fine of $500 per day until they come into compliance with CTA requirements. The criminal penalties can result in up to two years in jail and/or a financial penalty of up to $10,000.  To begin the process, please visit the official FinCen Website here. 

Who has an Exemption?

According to the National Law Review, there are 23 categories of companies that are exempt from the BOI reporting requirement. These exclusions include companies that are already subject to some sort of government oversight, such as public companies, banks, public utilities, tax-exempt nonprofits, and insurance companies. Furthermore, there is an exemption for “large” companies, defined as those organizations with more than 20 full-time employees in the United States, having reported over $5 million or more of annual gross revenue, and operating from leased or owned physical premises in the United States. Additionally, controlled or wholly owned subsidiaries of most exempt companies are themselves exempt. A company that meets the definition of a reporting company will need to evaluate its specific circumstances to determine whether it meets any exemption criteria under the CTA reporting rules.

Financial Crimes Enforcement Network Small Entity Compliance Guide   All the information regarding filing has been prepared by FinCen with chapters covering all aspects of reporting. Please view or download the guide for further reference.