Deadlines, Penalties & Requirements of the Beneficial Ownership Information Report
The Corporate Transparency Act, commonly known as the CTA, was enacted by Congress to further corporate transparency by identifying the people behind companies. For this reason, companies are now required to report information to FinCEN about the individuals who ultimately own or control them in a beneficial ownership information (BOI) report. FinCEN began accepting reports on January 1, 2024. Use the links below to navigate this page:
Page Content:
Useful links from FinCEN’s website:
Beneficial Owners Defined
Who Is a Beneficial Owner?
General Rule: An individual who, directly or indirectly, exercises “Substantial Control” over a Reporting Company or owns or controls at least 25 percent of the Ownership Interests of a Reporting Company.
Substantial Control Test
Indicators
- Senior Officer: President, CEO, COO, CFO, General Counsel, or any other officer, regardless of official title, who performs similar functions.
- Appointment or Removal Authority (of a Senior Officer or majority of Board of Directors).
- Important Decision Maker over important decisions (e.g., business, finances, structure).
- Catch-All: Any other form of Substantial Control.
Comments
- Equity ownership is not necessary under this test.
- Test requires all individuals who exercise Substantial Control over an entity to be identified and reported.
- Directors may exercise Substantial Control, depending on facts, but application unclear.
25 Percent Ownership Test
Three-Part Analysis
- Ownership Interest: Equity, stock, voting rights, capital or profits interests, convertible instrument, options and other ownership mechanisms.
- Ownership or Control of Ownership Interest: Any contract, arrangement, understanding, relationship or otherwise, such as through direct or indirect ownership, debt, joint ownership, nominee, trust, or owning or controlling intermediate entity that owns/controls Reporting Company.
- Calculation: Determine whether an individual directly or indirectly owns or controls 25 percent of the ownership interest (by reference to voting power, value, capital and profits interests or, if foregoing calculations cannot be performed with certainty, an individual is deemed to hold 25 percent ownership/control provided the individual owns/controls 25 percent or more of any class of ownership interest.
Exceptions from Beneficial Owner Definition
Company Applicants Defined
Definition: A Company Applicant is an individual involved with the formation or registration of a Reporting Company.
- Category 1: The individual who directly filed the document that created a Domestic Reporting Company or that first registered a Foreign Reporting Company with a secretary of state or similar office.
- Category 2: The individual who was primarily responsible for directing or controlling the filing of the creation or registration document, provided more than one individual was involved in the filing.
Comment: A Reporting Company formed on or after Jan. 1, 2024 (but not before) must report at least one Company Applicant and, at most, two.
What are the Reporting Obligations of a Reporting Company to FinCEN?
Reporting Company Created/Registered Before Jan. 1, 2024
Provide information about:
- Itself
- Beneficial Owners
- But not Company Applicants
Reporting Company Created/Registered On or After Jan. 1, 2024
Provide information about:
- Itself
- Beneficial Owners
- Company Applicants
Frequently Asked Questions & Links
What is Beneficial Ownership Information?
Beneficial ownership information refers to identifying information about the individuals who directly or indirectly own or control a company.
When is the deadline?
The deadline is December 31st, 2024 for companies created prior to 1/1/2024, with the exception of new companies created in 2024. In addition, companies created this year have 90 days to file.
Who is responsible to file?
A corporation, LLC or entity created by the filing of a document with a secretary of state or any similar office under the laws of a state or an Indian tribe (including U.S. territories and possessions). Currently FinCEN is requiring the owners and responsible parties (including attorneys) to go to the FinCen website and report this information.
Recurring Monthly Clients
If you are a client that receives ongoing accounting and tax services on a monthly payment arrangement, please know that we will guide you through this process. Further, we will provide you with more information within the next 90 days if not sooner. Importantly, if you have registered a new business in 2024, please contact us as soon as possible.
