BOI Reporting Service
From the 1st of January 2024, the majority of companies in the USA will be required to provide detailed information about their beneficial owners and other necessary business information. This requirement is outlined in the Corporate Transparency Act Filing, aimed at combating money laundering, terrorism financing, corruption, and tax fraud.
Failing to comply with the BOI requirements can lead to serious legal consequences, including civil fines of up to $500 per day of delay and imprisonment for up to 2 years. Not all companies required to report have been able to understand their obligations within such a short period. Therefore, we recommend seeking advice from experienced professionals who can provide expert consultations and assistance with the BOI Reporting Service.
What is the Beneficial Ownership Information Report & the Corporate Transparency Act?
In January 2021, the United States adopted the Corporate Transparency Act (CTA), which introduced significant changes to the requirements for disclosing information about a company’s beneficial owners. The aim of this law is to strengthen the fight against money laundering, terrorist financing, and other financial crimes by requiring companies to provide information about the individuals who actually control the business.
The Beneficial Ownership Information reporting is a mandatory document that certain companies must submit to the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Department of the Treasury. The report details information about the beneficial owners of the company, including their full name, date of birth, residential address, business address, and identification number.
Most private companies are required to submit a Beneficial Ownership Information report. To do this, they must register with the FinCEN system, collect the necessary data about beneficial owners, enter the information into the prescribed BOI report form, and send the report electronically.
For failing to report beneficial ownership information and comply with the requirements, various forms of sanctions are envisaged: civil penalties up to $500 for each day of delay, fines up to $10,000 and/or imprisonment for up to 2 years for intentional non-compliance, loss of trust from partners and clients, which can negatively impact the business.
The information provided to FinCEN is not public and is only accessible to authorised government bodies. FinCEN is committed to ensuring the proper protection of personal data of beneficial owners.
Who Needs to File a BOI Report?
Based on the current rule, two types of reporting companies have to file a BOI – unless they qualify for an exemption: 1) a domestic reporting company, and 2) a foreign reporting company.
According to FinCEN rules, the majority of legal entities are required to report beneficial ownership information: corporations, limited liability companies (LLCs), and other entities created in accordance with state legislation or registered to conduct business in the USA.
These requirements apply to the majority of private companies, including small and medium-sized enterprises. The BOI report must include information on individuals who actually control or benefit from the company’s activities.
Who is Exempt from BOI Reporting Rule?
The law exempts organisations that are already subject to strict disclosure and compliance requirements or have a special legal structure from the beneficial ownership information reporting requirements. The main categories of exceptions include:
- Public companies, whose shares are traded on major exchanges such as the New York Stock Exchange (NYSE) or NASDAQ. Since they are already required to disclose information about their shareholders and comply with the rules of the US Securities and Exchange Commission (SEC), their reporting on beneficial ownership is redundant.
- Financial institutions and other regulated entities: banks, credit unions, insurance companies, and other financial institutions are subject to stringent regulation and oversight by federal or state bodies. The activities of such organisations are already controlled by law, and disclosure and compliance requirements enable the monitoring of their ownership.
- Companies with a significant operational presence in the US must conduct business within the US and meet the following criteria: have a workforce of more than 20 employees, an annual income exceeding $5 million, and possess a physical office in the US.
- Non-profit organisations and governmental entities: federal, state, and local authorities, as well as certain non-profit and charitable organisations registered as 501(c)(3) in the US Tax Code;
- Subsidiaries of liberated organisations: given that the parent company is subject to stringent compliance and disclosure requirements, subsidiaries are considered as one and the same with the main organisation.
- Investment companies and financial funds: such entities are already registered with the Securities and Exchange Commission (SEC) or subject to other federal regulatory requirements. They are under supervision according to the law and disclose their information to other regulatory bodies.
- Utility and public organisations: those providing utility services (gas, electricity, water supply), as their operations are regulated by government bodies, and they are required to disclose information under other regulatory acts.
These exceptions were introduced to avoid duplicative reporting for organisations that are already required to disclose information about their beneficial ownership and control. The law focuses attention on private companies, which could be used for tax evasion or money laundering.
Who is a Beneficial Owner and what does Beneficial Ownership mean?
A beneficial owner (or beneficiary) is an individual who actually controls a company, benefits from it, or exerts significant influence over its operations, even if their name is not listed in the legal documents. Unlike a nominal owner, a beneficial owner may not be the registered owner of the company’s assets or shares, but in reality, they benefit from and can manage the company through various mechanisms.
Beneficial ownership represents the legal right to the benefits of a company’s assets, including:
- Right to income: receiving profits, dividends, or other financial benefits generated by a company.
- The right to manage assets: the ability to control or manage a company’s assets.
- The right to manage: participation in decision-making that affects the company’s operations, including the appointment of management and the choice of development direction.
According to FinCEN rules and the requirements of the Corporate Transparency Act, a beneficial owner is a person who:
- Holds 25% or more of the shares in the company (directly or indirectly);
- Has significant control over the company’s activities, even if their share is less than 25%.
- Benefits from the company’s operations by influencing strategic decision-making.
As an example of beneficial ownership, one might cite a shareholder with a significant stake in a company, who has voting rights, a managing partner with a share in the company, an individual controlling through a trust, hidden investors, and other legal entities.
Revealing beneficial ownership allows authorities to identify individuals who may use companies for illicit purposes. Transparency in the management and ownership structure of a company increases the trust of partners, clients, and investors.
What are the BOI Reporting Requirements?
New companies (established after 1 January 2024) must report beneficial ownership information to FinCEN within 30 calendar days of registration. Existing companies (established before 1 January 2024) are required to submit a BOI report within one year of the final FinCEN rules coming into effect, that is, by 1 January 2025.
Any changes to the structure of a company’s beneficial ownership must be reflected in an updated report, submitted within 30 calendar days from the date of change.
To ensure strict compliance with the requirements, we recommend conducting a comprehensive audit of the ownership structure, identifying all beneficial owners, developing procedures for tracking changes in the ownership structure, and timely updating of reports.
Our company is ready to provide professional assistance with BOI reporting service. We can help determine whether your company falls under the purview of the law, collect and verify necessary information about beneficial owners, ensure accurate form completion, and timely submission of reports to FinCEN.
What Details Must be Included Into Report?
During reporting beneficial ownership information, it is necessary to provide the following information for each beneficial owner: full legal name, date of birth, residential address and business address, unique identification number, and a copy of the passport or other government identification document.
You may also be required to provide additional information about reporting company and Company Applicants. A Company Applicant is the individual who submits the documents for company registration. Applicants must provide their full legal name, date of birth, business address, and a unique identification number.
What does “Substantial Control” Over a Reporting Company Mean?
Significant control over a reporting company means that an individual has the ability to influence important company decisions or oversee its operations, even if they do not own a substantial share of the company. This concept encompasses a wide range of roles and situations in which an individual can impact the management of the company.
According to FinCEN rules, an individual is considered to exercise significant control over a company if they:
- Holds a senior position: president, chief executive officer, chief financial officer, chief operating officer, managing director, company secretary, treasurer, or another individual performing similar functions.
- Has the authority to appoint or dismiss senior officials or the majority of the board of directors (or a similar governing body).
- Exerts a significant influence on the company’s key decisions, including changes to the charter or founding documents, setting strategic goals and policies, decisions on mergers, acquisitions, or liquidation, large-scale financial decisions (investments, loans, profit distribution), and changes in ownership structure.
As a real-life example, one could mention individuals who, under contract, have the right to make key decisions or manage the company’s operations, owners of preferred shares or other financial instruments, partners with veto rights, advisors, or consultants.
Who is the Company Applicant?
A company applicant is an individual who has initiated the registration of a company or submitted documents for the registration of the company as a separate legal entity. The company applicant can be a natural person directly filling in and submitting the beneficial ownership information, a professional agent, or a representative who submits the documents on behalf of a client.
Therefore, the applicant is the individual who officially initiates the creation of a company and submits the legal documents for its registration. These typically include:
- Company founders: individuals who establish a company and submit documents on its behalf.
- Professional representatives: solicitors, registration agents, consultants, or other individuals authorised to submit documents on behalf of a client;
- Employees: In large companies, this could be an employee designated to serve legal documents on behalf of the company.
The applicant’s indication for the company is mandatory. New companies (registered after 1 January 2024) must disclose information about the individuals who filed the documents for the company’s registration, along with details of the beneficial owners. This requirement aids authorities in tracking the chain of individuals associated with the establishment of a company.
Lawyer for BOI Reporting Service
Compliance with the Corporate Transparency Act has become an essential part of corporate compliance in the United States. For many companies, this is a challenging task that requires special attention to detail and a professional approach. Our company provides comprehensive legal support in matters of BOI reporting service and helps to meet legislative requirements.
Preparing and submitting beneficial ownership reports requires accuracy and adherence to strict rules. Mistakes, omissions, and delays can lead to severe fines and even criminal liability. Working with a professional in corporate compliance allows you to avoid these risks. Our company offers the following BOI reporting service:
- Consultations on the requirements of the Corporate Transparency Act.
- Analysing the company’s structure and identifying the beneficial owners.
- Full support for the process of filing a report on beneficial ownership, including data collection, form completion, and submission to FinCEN;
- Prompt update of the report in the event of any changes in the ownership structure or company management.
- Support during inspections and potential sanctions.
We understand that every company is unique, and we develop solutions tailored to your needs and business structure. Our sanction lawyers provide support at all stages – from consultations to filing beneficial ownership information and defending the company’s interests during audits. We take on the responsibility for complying with all regulatory requirements, freeing you from administrative burdens.
Contact us right now for an initial consultation and clarification on any questions regarding corporate compliance in the United States. Our specialists will provide your company with professional support and help avoid legal risks associated with non-compliance with beneficial ownership legislation.
Any company or legal entity that is registered or conducts business in the United States is required to file a report beneficial ownership information (BOI). This requirement applies to corporations, LLCs, partnerships, and other forms of business, with the exception of certain categories (such as large public companies and regulated financial institutions) which are exempt from reporting.
Companies registered before 1 January 2024 must submit their initial report by 1 January 2025. Those established after 1 January 2024 are required to submit their initial company’s beneficial ownership information within 90 days from the date of receiving notification of their registration coming into effect. Companies created after 1 January 2025 must submit their initial BOI report within 30 days of their registration becoming effective. It is also crucial to timely update the report in case of changes to beneficial owners or their information.
Access to the information on beneficial owners submitted to FinCEN is restricted and only provided to authorised individuals and agencies (US law enforcement and regulatory bodies). Financial institutions may also request access to obtain beneficial ownership information, but solely for the purpose of fulfilling their compliance obligations, and only with FinCEN’s approval.
The beneficial ownership information reports do not need to be submitted annually. However, companies are required to update their information with FinCEN within 30 days in the event of changes to the data on beneficial owners.
Failure to submit a beneficial ownership information report or providing false information can result in significant fines. Depending on the circumstances, a company could be fined up to $500 for each day of delay. Additionally, criminal penalties may be imposed in cases of intentional concealment of information about beneficial owners. Potential violations include deliberately failing to submit a report, submitting false information about BOI, or failing to provide corrections or updates to previously submitted information.
A FinCEN Identifier is a unique number assigned upon request to a reporting company, beneficial owner, or applicant company. Reporting companies can use FinCEN Identifiers to simplify and streamline the completion of BOI forms. Obtaining a FinCEN Identifier is not mandatory.
