January 1 deadline approaching for reporting Beneficial Ownership Information

A Beneficial Owner is anyone who directly or indirectly exercises substantial control over or owns or controls at least 25 percent interest in a business.

The US Corporate Transparency Act was primarily introduced to help tackle illicit activities by increasing transparency of company ownership structures. By requiring companies to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), the Act aims to prevent misuse of corporations and limited liability companies for criminal gain - preventing money laundering, fraud, financing of terrorism, and so on In. You can do this yourself through this link: https://boiefiling.fincen.gov/boir/html Wealthspring Financial Services can file it for you at a cost for $179. Please let us know how you want to proceed.

Who is a Beneficial Owner?

A Beneficial Owner is anyone who directly or indirectly exercises substantial control over or owns or controls at least 25 percent interest in a business. An individual exercises substantial control over a reporting company if they fall into any of the following categories:

• The individual is a senior officer;

• The individual has authority to appoint or remove certain officers or a majority of directors;

• The individual is an important decision-maker; or

• The individual has any other form of substantial control.

FinCEN provides additional details about each of these four reporting categories.

What companies are required to report under the CTA?

A company may need to report information about its beneficial owners if it is:

1. A corporation, a limited liability company, or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Tribal jurisdiction; or

2. A foreign company registered to do business in any U.S. state or Tribal jurisdiction by such a filing.

A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial beneficial ownership information report.

The timeframe for newer businesses to file is shorter. Companies created or registered in 2024 have 90 days to file this information, and those created or registered after January 1, 2025, have only 30 days to file.

Who is exempt from filing BOI?

There are 23 types of exempt entities. These entities are already subject to stringent federal and/or state regulations for reporting beneficial ownership. These exempt entities include, but are not limited to:

• Accounting firms

• Banks

• Brokers / securities dealers

• Credit unions

• Governmental authorities

• Insurance companies

• Investments companies / advisors

• Public utilities

• Tax-exempt entities

• Venture capital fund advisors

FinCEN’s Small Entity Compliance Guide includes a list of reporting company exemptions and checklists to help companies determine if they are exempt from the reporting requirements.

What information is required?

A reporting company is required to provide basic information for itself and all beneficial owners.

For the reporting company, the required information includes legal name, trade names, address, jurisdiction of registration, and its taxpayer identification number.

For the beneficial owners, the required information includes name, date of birth, residential address, and an identifying number from an identification document such as a passport or driver’s license.

How to Prepare and File BOI

FinCEN has created the BOI E-Filing system to electronically file the Beneficial Ownership Information Report.

What happens if I don’t file by the deadline?

Failure to file may become extremely costly, with civil penalties starting at $500 per day and criminal penalties of up to $10,000 and/or two years in prison.