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  • Writer's pictureEmily Schorr

Beneficial Ownership Information Report- All the Information Business Owners Need to Know

Beneficial Ownership Information Report- All the Information Business Owners Need to Know

Starting January 1st, 2024, if you have an LLC or are Incorporated you will be required to file an additional type of tax form called a BOI - “Beneficial Ownership Information" report.  Most registered business entities - like Limited Liability Companies (LLCs) and Corporations will likely need to file.  This will affect an estimated 32.6 small business owners.  

Failure to file this report can result in civil penalties of up to $500 per day or $10,000 max! 

And you can also get up to 2 years in prison. 

Businesses created before January 1st, 2024 will have until January 1, 2025, to file their initial report.  

If your entity is created after January 1st, 2024 you have 90 days to file this report.  

The reason for this new requirement is to identify people who set up fraudulent businesses to launder money or fund terrorist activities under the Corporate Transparency Act (CTA). 

You only have to file this report once, and you will only have to file a new report if any info changes about your business, such as adding or removing a partner or shareholder.  

More information can be found here, including all the FAQs. There is no cost to submit a BOI report to FinCEN by yourself.  

Who Must File a Beneficial Ownership Information Report?

Who Must File a Beneficial Ownership Information Report? 

A company must submit a BOI report if it meets the FinCEN’s beneficial owner reporting rule’s definition of a “reporting company” and does not qualify for an exemption.

How do you determine if your business qualifies as a reporting company? 

Reporting companies are classified as either domestic or foreign.

The Criteria for Domestic or Foreign Companies Include:

The Criteria for Domestic or Foreign Companies Include:

  1. Domestic reporting company – A corporation, LLC, or any business entity created through filing a registration document with a secretary of state (or similar) office under the law of a state or Indian tribe.

  2. Foreign reporting company – A corporation, LLC, or other entity formed under the law of a foreign country that filed a document with a secretary of state or any similar office to register to do business in any U.S. state or tribal jurisdiction.

LLCs and C Corporations (including those with S Corporation status) fall under these definitions. Likewise, other entity types formed by filing registration documents with the state may be considered reporting companies — e.g., Limited Partnerships, Limited Liability Partnerships, Limited Liability Limited Partnerships, and business trusts.

Who is Exempt from filing a Beneficial Ownership Information Report

Who is Exempt? 

There are currently 23 exemptions to the following categories: 

  1. Securities reporting issuer 

  2. Governmental authority 

  3. Bank 

  4. Credit union 

  5. Depository institution holding company

  6. Money services business 

  7. Broker or dealer in securities 

  8. Securities exchange or clearing agency 

  9. Other Exchange Act registered entity 

  10. Investment company or investment adviser 

  11. Venture capital fund adviser 

  12. Insurance company 

  13. State-licensed insurance producer

  14. Commodity Exchange Act registered entity 

  15. Accounting firm – only those that are a public accounting firm registered in accordance with section 102 of the Sarbanes-Oxley Act of 2002 is exempt from BOI reporting.

  16. Public utility 

  17. Financial market utility 

  18. Pooled investment vehicle 

  19. Tax-exempt entity – The entity must meet any one of the following criteria to be exempt:

  20. It is an organization that is described in section 501(c) of the Internal Revenue Code of 1986 (determined without regard to section 508(a) and exempt from tax under section 501(a).

  21. It is an organization described in section 501(c) of the Code and was exempt from tax under section 501(a) but lost its tax-exempt status less than 180 days ago.

  22. It is a political organization, as defined in section 527(e)(1) of the Code, that is exempt from tax under section 527(a).

  23. It is a trust, as described in paragraph 1 or 2 of Internal Revenue Code section 4947.

  24. Entity assisting a tax-exempt entity – The entity must meet all four of the following criteria:

  25. The entity operates exclusively to provide financial assistance to or hold governance rights over any tax-exempt entity described by Exemption #19.

  26. The entity is a United States person as defined in section 7701(a)(30) of the Internal Revenue Code of 1986.

  27. The entity is beneficially owned or controlled exclusively by one or more United States persons who are United States citizens or lawfully admitted for permanent residence. “Lawfully admitted for permanent residence” is defined in section 101(a) of the Immigration and Nationality Act.

  28. The entity derives at least a majority of its funding or revenue from one or more United States persons who are United States citizens or lawfully admitted for permanent residence.

  29. Large operating company – An entity qualifies for exemption if all six of the following criteria are true:

  30. It employs more than 20 full-time employees. (Generally, “full-time employee” means an employee employed by the entity for an average of 30 or more hours of service per week.)

  31. More than 20 of the entity’s full-time employees are employed in the United States.

  32. The entity has an operating presence at a physical office within the United States.

  33. The entity filed a Federal income tax or information return in the United States for the previous year demonstrating more than $5,000,000 in gross receipts or sales.

  34. The company reported >$5,000,000 in gross receipts or sales (net of returns and allowances) on the entity’s IRS Form 1120, consolidated Form 1120, Form 1120-S, Form 1065, or other IRS form.

  35. The gross receipts or sales amount remains greater than $5,000,000 after excluding gross receipts or sales from sources outside the United States.

  36. Subsidiary of certain exempt entities 

  37. Inactive entity – An entity qualifies for exemption if all six of the following criteria apply:

  38. The entity was in existence on or before January 1, 2020.

  39. The entity is not engaged in active business.

  40. The entity is not owned by a foreign person, whether directly or indirectly, wholly or partially.

  41. The entity has not experienced any change in ownership in the preceding twelve-month period.

  42. The entity has not sent or received any funds of more than $1,000 in the prior 12-month period.

  43. The entity does not otherwise hold any kind or type of assets, in the United States or abroad, including any ownership interest in any corporation, limited liability company, or other entity.

Beneficial Ownership Information Reporting Requirements: 

Reporting Requirements: 

The BOI report collects the following information about the reporting company and its beneficial owners and company applicants.

Reporting company information:

  1. Entity’s full legal name

  2. Any DBAs or trade names

  3. Principal U.S. business address

  4. Formation jurisdiction (state, tribal, or foreign)

  5. IRS taxpayer ID number (TIN, Social Security Number, EIN)

Beneficial owners and company applicants information:

  1. Full legal name

  2. Date of birth

  3. Complete residential street address (depending on the circumstances, company applicants should use the business address instead).

  4. Personal identification number and issuing jurisdiction from — and image of — a non-expired U.S. passport; state driver’s license; other ID document issued by a state, local government, or tribe; or a foreign passport if the individual doesn’t have any of the other forms of identification.

If a beneficial owner or company applicant has obtained a FinCEN identifier, the reporting company can include that FinCEN identifier in its report instead of the other information about the entity or individual. A FinCEN identifier is a unique ID number issued to an individual or reporting company upon request. Individuals may request one through an electronic application. A reporting company can request one by checking a box on its BOI report. No one is required to get a FinCEN identifier.

Who is Considered a Beneficial Owner of a Reporting Company? 

Who is Considered a Beneficial Owner of a Reporting Company? 

Any individual who directly or indirectly exercises substantial control over the reporting company OR owns or controls at least 25% of its ownership interests is a beneficial owner. It’s possible a beneficial owner could have both substantial control and 25% or more ownership interests.

A reporting company can have multiple beneficial owners and must report all of them in its BOI report.

Note that FinCEN has some special reporting rules applicable to certain types of beneficial owners (e.g., minor children, individuals whose ownership interests in a reporting company are held through one or more entities considered exempt from the reporting company definition, and companies that meet the pooled investment vehicle exemption criteria).

Redbud Advisors works with cannabis businesses on a monthly basis to help keep them compliant with all state, federal, and FinCEN filing requirements; please let us know if you have any questions.

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