A new requirement for 2024 is that all new and most existing businesses will be required to report the “beneficial ownership information report (BOIR)” of their businesses to the Financial Crimes Enforcement Network (FinCen), the people who brought you the lovely Form 114 to report foreign bank accounts to the government.
This new requirement encompasses any business organization which is required to register with a state regulatory authority for its formation, such as LLCs, LLPs, Corps, S-Corps, LPs, etc., unless the entity is specifically exempt from reporting.
The requirements give only a short window for new entities to file the required information with FinCen. For existing entities at 12/31/2023 who are required to report, the first reports are due by 12/31/2024. Report errors can be corrected within 90 days of the original filing without penalty.
The penalties for not filing are HUGE. Late reports are subject to an indexed $500 per day penalty. As of now the indexed penalty has risen to $591 per day. There is a general penalty limitation now of $10,000 for failure to file the BOIR or filing required BOIR’s late.
There are limited exceptions to filing, which include publicly traded companies, tax-exempt entities, large companies (with at least 20 full time employees in a US office), inactive entities, security dealers or brokers, investment companies registered with the SEC, certain venture capital companies who have filed certain schedules with the SEC, etc. The exemptions are generally for highly regulated entities who have already provided the information to the government in other filings.
In general, the information to be provided is the personal information, including their residential addresses for all 25% or more owners, as well as anyone else with “substantial control” of the company regardless of ownership percentage. Examples would be a 25% owner who is a “silent partner” as well as a 0% owner who is CFO of the company. The government has not yet provided information about “beneficial ownership” under the attribution rules, so until final instructions are published, it would be safest to assume that the broadest ownership attribution rules apply.
In lieu of providing the specific beneficial owner’s detailed information, if the beneficial owner has a “FinCen Identifier” all they need to provide is that FinCen Identifier number. That avoids the personal information having to be provided. It also removes the responsibility of reporting changes in the personal information (a move, a divorce) from the company and leaves it with the person with the FinCen Identifier Number to report their changes.
Any changes in information provided needs to be updated with FinCen within 30 days of the change, including transfers of ownership of a reportable beneficial interest, changes in responsible parties, address changes, deaths, etc. The same penalties that apply to late or incorrect/incomplete filings apply to late, incorrect or incomplete updates.
This is a serious responsibility, and while there is still time to figure out how to ensure compliance with these rules, now is the time to start figuring out and implementing the new reporting requirements before the penalties kick in.
If the entity that potentially needs to file a BOIR, it is probable that you will not need assistance in completing the form or any updates. For example, a special purpose entity LLC that is formed as liability protection for the owners of a rental property should be pretty easy to complete the BOIR for. An operating entity owned equally by four owners which is professionally managed by a group of executives may be more difficult. Likewise, potential reporting entities which have changed status or are changing status may need assistance in determining whether they have a filing requirement and exactly what to report. If you are interested in more information about BOIR requirement and file a BOIR yourself, please visit FinCen website at https://boiefiling.fincen.gov/fileboir
This is not a financial or a tax report. Determination of who must be included on an organization’s BOIR is a legal question. We are not preparing or assisting in the filing of BOIRs. If you need help with filing your BOIR, you should contact your business attorney who is responsible for your filings with state authorities for assistance. This filing is similar in nature to the “Statement of Domestic Stock Corporation” or the LLC bi-annual Statement of Information form (LLC-12), although there are some subtle nuances which cannot be overlooked.
If you do not have a corporate attorney, or your attorney is not preparing the BOIR, we may be able to help you find a qualified person or firm to assist you with this responsibility.
