A Quick Breakdown of FinCEN’s Small Entity Compliance Guide
Understanding the complexities of the Corporate Transparency Act and Beneficial Ownership Information Reporting requirements can be daunting. This breakdown simplifies FinCEN’s 56-page Small Entity Compliance Guide into an easy-to-understand summary, providing you with the key points you need.
(1) Determining Reporting Obligations:
Most entities in the U.S. need to meet the BOI reporting requirements.
- Domestic companies formed by submitting a state filing need to submit BOI Reports. This includes: LLCs, corporations and partnerships.
- Foreign entities that are registered to do business in the U.S. also need to report.
- 23 types of businesses are exempt from filing BOI Reports. These are mostly large companies or publicly traded companies.
(2) Identifying Beneficial Owners:
Entities need to report information about their significant owners and substantial control parties.
- A beneficial owner has at least 25% ownership in a reporting company.
- Anyone who has substantial control over important company decisions also needs to be reported. These individuals are called “control parties”.
- Beneficial owners can have direct ownership, like corporate stock, or indirect ownership like options or future arrangements.
(3) Reporting Company Applicants:
New reporting companies formed in 2024 need to disclose the individuals most responsible for having the entity formed.
- Reporting companies created after January 1, 2024 need to report two company applicants.
- Company Applicant 1 – the person most responsible for having the company formed.
- Company Applicant 2- the person who submitted the formation documents to the state.
(4) What Specific Information is Reported:
- Company Information – legal name, state of formation, principal business address in the U.S., tax ID number, all trade names and DBAs.
- Individual Information – full name, current residential address, date of birth, image of a valid ID document.
- Individuals can obtain a unique FinCEN identifier to use when submitting BOI reports.
(5) When and How to File BOI Reports:
BOI reports need to be submitted through FinCEN’s online filing system before the state deadlines.
- Entities created before January 1, 2024 – File initial reports before January 1, 2025
- Entities created after January 1, 2024 – File initial reports within 30 days of forming.
- File updated reports within 30 days of any change in information.
- File corrected reports within 30 days of noticing any incorrect information in a previous report.