Corporate Transparency Act (CTA) — Beneficial Ownership Information (BOI) Reporting

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Business Law Southwest (BLSW) has a range of features to help small and medium sized businesses with FinCEN compliance of Beneficial Ownership Information (BOI) reporting and compliance.

Along with our partners, BOI-Labs.com and Law 4 Small Business (L4SB), BLSW provides the industry leading tools and services at a very low-cost.

What do you need help with today?

• BOI Consulting. Just have questions and need advisement? You can order a 30-minute consult from our sister law firm, L4SB, from this link. Or, you can contact us and we can schedule time to talk with one of our attorneys trained in FinCEN compliance with BOI.
• BOI Reporting (initial reports and updated reports). Want help with reporting? You can order the service directly from L4SB, from this link. Or, you can contact us, and we’ll schedule time to talk about the process and help you as much (or as little) as you need.
• BOI Compliance. For a low monthly fee, we can help you with compliance, providing updated reports as needed as well as advisement and consulting. Again, you can order this service directly from our sister law firm, L4SB, from this link. Or, you can contact us to discuss further.
• BOI Assessment / Evaluation. Are you unsure whether your company is required to report, or who are its beneficial owners? Access the world’s most sophisticated expert system, thanks to BOI-Labs (free and anonymously), to answer these questions for you. This is the link.

Why is BOI Compliance Important?

In 2021, Congress (in its infinite wisdom) passed the Corporate Transparency Act (CTA) that is administered by the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN). This law creates a new Beneficial Ownership Information reporting requirement as part of the U.S. government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures. You can learn more here.

The CTA imposes 100 pages of arcane rules and definitions around company reporting requirements, and most importantly, creates stiff financial penalties (up to $500 per day) and criminal sanctions (with actual jail time) for anyone failing to report, submitting false information, and not maintaining accurate and up-to-date information (i.e. beneficial owners actually have to provide their residential address, and you have no more than ninety (90) days to remember to update your information, otherwise face severe consequences).

What is Beneficial Ownership Information (BOI)?

Beneficial Ownership Information (BOI) refers to identifying information about a company, and individuals who directly or indirectly own or control a company.

For a company, this information includes the legal name, trade name (i.e. d/b/a), current street address of the principal place of business, state of registration, and a taxpayer identification number (i.e. EIN or FEIN).

For an individual, this information includes the individual’s name, date of birth, residential address, and an acceptable form of ID (See next FAQ for a list of acceptable forms of ID). For the ID, you must provide the ID Number, the issuing state or jurisdiction, and a legible image of the ID.

What are Acceptable Forms of ID for BOI Compliance?

The only acceptable forms of identification are:

• A non-expired U.S. driver’s license (including any driver’s licenses issued by a commonwealth, territory, or possession of the United States);
• A non-expired identification document issued by a U.S. state or local government, or Indian Tribe;
• A non-expired passport issued by the U.S. government; or
• A non-expired passport issued by a foreign government (only when an individual does not have one of the other three forms of identification listed above).

What Companies are Required to Report BOI?

All corporations, LLC’s and legal entities that are formed by submitting a document under law of a US State or Native American (Indian) jurisdiction.

This includes foreign entities that are registered to do business in any US State or Native American (Indian) jurisdiction.

Some entities are exempt from reporting requirements. Such entities include publicly traded companies, many nonprofits, certain large operating companies, and companies that are already required to register with the FTC, FCC, SEC or FinCEN, such as banks and insurance companies.

Large companies are excluded from reporting, which are defined as entities employing more than 20 FTE’s in the US, have an operating presence with a physical office in the US, and filed a US federal tax form demonstrating $5M or more in gross receipts or sales, derived from US-based sources (income derived from sources outside the US are not to be counted).

Want to know if your company is required to report BOI? Access our FREE Expert System now!

If My Company Hasn’t Been Active, Does It Still Need to Report BOI?

In certain circumstances, inactive entities who would otherwise be required to report, are excused from reporting. The circumstances are fairly narrow, however. You must answer “YES” to all six of the following criteria to be deemed an inactive entity excused from reporting:

• Entity has been in existence on or before January 1st, 2020
• Entity has not engaged in active business
• Entity is not owned (even partially) by a foreign person (defined as someone who is not a United States Person as defined in 7701(a)(30) of the Internal Revenue Code of 1986)
• Entity has not experienced any change in ownership in the preceding twelve (12) month period
• Entity has not sent or received any funds greater than $1,000, in the preceding twelve (12) month period
• Entity does not hold any kind or type of assets, in the US or abroad, including real property or an ownership interest in any other entity

If you want more help determining whether your company may be excluded from reporting, consider using our FREE Expert System to help you determine whether your Company must file a Beneficial Ownership Interest Report, and who is considered to have a beneficial ownership interest (BOI) in your Company.

Who Are Considered Beneficial Owners of My Company?

A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over a company, or (2) owns or controls at least 25% of a company’s ownership interests.

Substantial control means an individual exercises substantial control over a company in one or more of four different ways. If the individual falls into any of the categories below, the individual is exercising substantial control:

• The individual is a senior officer (i.e. a c-level officer, such as the company’s president, chief financial officer, general counsel, chief executive office, chief operating officer, manager, or any other officer who performs a similar function)
• The individual has authority to appoint or remove certain officers or a majority of directors (or similar body) of a company
• The individual is an important decision-maker for a company
• The individual has any other form of substantial control over the reporting company as explained further in FinCEN’s Small Entity Compliance Guide (see Chapter 2.1, “What is substantial control?”)

Important decision makers are those individuals who direct, determine, or otherwise has substantial influence over important decisions made by a company, including:

• business decisions, including those involving the nature, scope, attributes, geography of the company’s products and/or services, and/or approval of important contracts
• financial decisions, including those involving the sale, lease or transfer of principal assets, or of major expenditures, issuances of equity, incurrence of debt or approval of a budget
• structure decisions, including those involving reorganization, dissolution or merger of the entity, or amendments of any substantial governance documents or significant policies or procedures

If you want more help, try out our FREE Expert System to help you determine who is considered to have a beneficial ownership interest (BOI) in your Company.

Who Has Access to BOI?

FinCEN will permit Federal, State, local, and Tribal officials, as well as certain foreign officials who submit a request through a U.S. Federal government agency, to obtain Beneficial Ownership Information (BOI) for authorized activities related to national security, intelligence, and law enforcement. Financial institutions will also have access to BOI in certain circumstances, with the consent of the reporting company. Those financial institutions’ regulators will also have access to BOI when they supervise the financial institutions.

FinCEN is developing the rules that will govern access to and handling of BOI. BOI reported to FinCEN will be stored in a secure, non-public database using rigorous information security methods and controls typically used in the Federal government to protect non-classified yet sensitive information systems at the highest security level. FinCEN will work closely with those authorized to access beneficial ownership information to ensure that they understand their roles and responsibilities to ensure that the reported information is used only for authorized purposes and handled in a way that protects its security and confidentiality.

If you have further questions, please contact us.