Beneficial Ownership Information (BOI) Reporting Requirements

The Corporate Transparency Act (CTA), enacted as part of the Anti-Money Laundering Act of 2020, introduces Beneficial Ownership Information (BOI) reporting requirements to increase transparency and prevent the misuse of legal entities for money laundering, fraud, and other illicit activities. The U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) oversees these requirements. These rules apply to many domestic and foreign entities operating in the United States.

Key Elements of BOI Reporting Requirements

1. Who Must Report:
   • Reporting Companies:
     • Domestic entities: Corporations, limited liability companies (LLCs), and other similar entities created by filing with a state or tribal authority.
     • Foreign entities: Entities registered to do business in the U.S.
   • Exempt Entities:
     • Certain entities are exempt from reporting due to their low risk of misuse, such as:
       • Large operating companies (with >20 employees, >$5 million in gross receipts, and a physical presence in the U.S.).
       • Publicly traded companies.
       • Regulated entities like banks and insurance companies.
2. Who is a Beneficial Owner?:
   • A beneficial owner is any individual who:
     • Exercises substantial control over the reporting company.
     • Owns or controls at least 25% of the reporting company’s ownership interests.
   • This definition captures:
     • Individuals with significant decision-making authority.
     • Individuals with substantial financial stakes in the company.
3. What Information Must Be Reported?:
   • Reporting companies must provide:
     • For the company:
       • Legal name.
       • Address.
       • Formation or registration jurisdiction.
       • Taxpayer Identification Number (TIN) or equivalent.
     • For each beneficial owner:
       • Full legal name.
       • Date of birth.
       • Current residential or business address.
       • A unique identifying number from an acceptable identification document (e.g., driver’s license or passport).
4. Deadlines for Reporting:
   • Existing Entities:
     • Entities formed before January 1, 2024, must file BOI reports by January 1, 2025.
   • New Entities:
     • Entities formed or registered on or after January 1, 2024, must file BOI reports within 30 days of formation or registration.
5. Updates to Information:
   • Changes to beneficial ownership or other reportable information must be reported within 30 days of the change.

Purpose and Importance of BOI Reporting

1. Combatting Illicit Activities:
   • BOI reporting aims to deter the misuse of legal entities for money laundering, terrorism financing, and other criminal activities.
   • It provides law enforcement and regulators with critical data to investigate and prosecute financial crimes.
2. Enhancing Corporate Transparency:
   • Increased transparency ensures accountability for business owners and discourages the use of shell companies for concealing illicit activities.
3. Compliance with Global Standards:
   • BOI reporting aligns U.S. practices with international anti-money laundering and transparency standards.

Penalties for Non-Compliance

1. Civil and Criminal Penalties:
   • Non-compliance with BOI reporting requirements can result in:
     • Civil penalties of up to $500 per day.
     • Criminal fines up to $10,000.
     • Imprisonment of up to 2 years for willful violations.
   • These penalties emphasize the importance of timely and accurate reporting.

How a Louisiana Attorney Can Help

1. Determining Applicability:
   • An attorney can evaluate whether your business is subject to BOI reporting requirements or qualifies for an exemption.
2. Preparing Accurate Reports:
   • Ensuring all required information is gathered, verified, and submitted accurately to avoid penalties.
3. Ongoing Compliance:
   • Advising on changes to beneficial ownership or business structure that may trigger additional reporting.
4. Mitigating Penalties:
   • Representing businesses in the event of alleged non-compliance and working to resolve disputes with FinCEN.

Conclusion

BOI reporting requirements introduce significant responsibilities for many businesses to provide detailed ownership information. Compliance ensures transparency, prevents misuse of business entities, and avoids costly penalties. Working with an experienced attorney can simplify compliance, minimize risk, and help you navigate this complex regulatory landscape.

Let’s work together to ensure your business complies with BOI reporting requirements and remains on a solid legal footing.