The United Nations estimates that the amount of money laundered globally is as high as $2 trillion a year. Governments around the world are taking steps to protect the financial system from crimes like money laundering. Among the new measures in the U.S. is the Corporate Transparency Act (CTA).

Congress enacted the CTA in 2021. The CTA requires many businesses that operate in the U.S. to report information about their beneficial owners. The reporting platform opened on January 1, 2024.

Many businesses are scrambling to figure out what they need to report. Learn more about filing beneficial ownership information reports and how a business lawyer can help.

The Corporate Transparency Act and Beneficial Ownership Information

Beneficial ownership information (BOI) reports are a requirement of the Corporate Transparency Act. The goal of the law was to fight illegal activities, like

• Tax fraud
• Money laundering
• Terrorism financing

The CTA is designed to prevent bad actors from hiding or benefiting from their ownership of a U.S.-based entity.

Companies that meet the criteria under the law must report information about their beneficial owners to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). FinCEN will keep the information in the beneficial ownership registry secure and confidential.

What Are Beneficial Ownership Information Reports?

Beneficial ownership information reports tell the federal government who owns or controls companies doing business in the U.S. Reporting companies typically need to provide four pieces of information about each beneficial owner:

• Name
• Birth date
• Address
• Passport, driver’s license, state or local ID card, or Indian tribal ID number

A foreign passport can be used for BOI reporting if the beneficial owner doesn’t have any valid form of American ID. Any form of ID used for BOI reporting must not be expired.

Information about the company is also a requirement. Reporting companies formed before January 1, 2024, must submit:

• Business name
• Business address

Reporting companies formed on or after January 1, 2024, also need to submit information about the people who created the company.

How to Determine Beneficial Ownership

A beneficial owner is someone who:

• Exercises substantial control over the reporting company, or
• Owns or controls 25% or more of the reporting company’s ownership interests

Beneficial owners may exert direct or indirect control.

Exercising Substantial Control

A beneficial owner can exercise substantial control in several ways, such as:

• Serving as a senior officer, like president or chief executive officer
• Having authority to appoint or remove officers or directors of the company
• Serving as an important decision maker

Someone who exercises a form of substantial control not listed is still a beneficial owner. The FinCen Small Entity Compliance Guide provides more detail on determining substantial control.

Holding an Ownership Interest

Ownership interests can include stocks, equity, voting rights, capital interest, convertible instruments, or options. Reporting companies may have more than one kind of ownership interest. Someone who holds at least 25% of any type of ownership interest is a beneficial owner.

Exemptions to Beneficial Ownership

A person may be exempt from qualifying as a beneficial owner. The exemptions include:

• Minor children
• Inheritors who will inherit interest in the reporting company in the future
• Employees of the company, except senior officers
• Agents or custodians
• Creditors

Tax professionals and lawyers usually qualify for an exemption as agents or custodians. They act on behalf of an actual beneficiary owner.

Which Businesses Need to Submit Beneficial Ownership Information Reports?

Most privately-held companies registered to conduct business in the U.S. need to follow BOI reporting requirements. The law applies to domestic or foreign companies.

Publicly-traded companies don’t fall under the same reporting requirements. This is because publicly-traded entities have their own reporting requirements.

Several other exemptions exist, such as:

• Companies with more than 20 full-time employees and $5 million in gross sales or receipts
• Banks, credit unions, and some other financial institutions
• Insurance companies
• Nonprofits
• Public utilities

Some statutory trusts, business trusts, and foundations may be reporting companies. You may want to consult a lawyer to determine if your organization needs to file a BOI report.

How and When to Submit a Beneficial Ownership Report

You can submit your beneficial ownership information online through the BOI e-filing website. Select the option to “File BOIR” to access the reporting form. Filing is free.

The Corporate Transparency Act requires reporting companies to submit information directly to FinCEN. State or local governments, financial institutions, or other federal agencies may have their own reporting requirements. Filing with these other organizations isn’t a substitute for submitting information to the FinCEN beneficial ownership registry.

Who Can File a Beneficial Ownership Report

An employee or owner of your company can file the beneficial ownership information report. You can use a third-party service provider if you choose. You may consult with a lawyer or an accountant.

Many businesses will be able to follow the reporting requirements without external help. If you have questions or a more complicated business situation, a lawyer may be useful.

Submission Deadlines for BOI Reporting

The deadline for submitting beneficial ownership information reports depends on when your company was established. If you created your company before January 1, 2024, you must fulfill your BOI reporting requirements by January 1, 2025. Businesses created in 2024 have 90 calendar days from their effective registration date to file BOI information. Companies registered in 2025 will need to submit beneficial ownership information reports within 30 calendar days.

You don’t need to submit a beneficial ownership report every year. After you file the initial BOI report, you only need to re-file if you’re updating or correcting it.

Find Help with Your BOI Reporting

Beneficial ownership information reports are a new requirement for many companies. They help FinCEN prevent and prosecute financial crimes. Accurately determining who the beneficial owners are for your company and reporting that information correctly is essential.

Rhodes Law Firm, PC has been serving business clients in the Augusta/Aiken area for over 40 years. Our expertise in business law means you can count on us to be a reliable partner. We can help you navigate BOI reporting to ensure that your report is accurate and filed on time.

Schedule a consultation with Rhodes Law Firm today to discuss the best way to fulfill your BOI reporting requirements.