The Beneficial Ownership Information (BOI) Reporting Rule

| April 25, 2024 | By

Effective Jan. 1, 2024, a new Beneficial Ownership Information (BOI) Reporting rule went into effect. This rule, an initiative aimed at helping businesses stay compliant with the Corporate Transparency Act, asks most businesses to report detailed information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).

That can sound scary—and the requirements, at first glance, may seem complex. We’re here to demystify the BOI regulations to help you stay compliant.

What Is the Beneficial Ownership Information (BOI) Reporting Rule? 

The government needed a new way to reduce the occurrence of financial crimes such as money laundering. The BOI Reporting rule is designed to do just that. Its goal is to boost transparency from both domestic and foreign entities operating within the U.S..

Under the new rule, companies need to disclose the identity of individuals who have control over or have an interest in the business. This can encompass many different actions and types of ownership, such as people who direct business strategies, manage organizational change or expenditures, or have financial stakes in the company.

Who Needs to Report Under the New BOI Reporting Rule? 

Nearly all foreign and domestic companies that are registered to do business in the United States will be subject to this rule.

That said, there are exemptions. If you’re a publicly-listed company, or if you’re a larger operating company with substantial U.S. activity, you may not need to report beneficial owners.

Even with exemptions, the number of businesses expected to begin reporting is significant. Within the first year of implementation, it’s anticipated that the FinCEN will see over 32 million entities reporting.

Timeline, Compliance, and Logistics for BOI Reporting

If you formed or registered your company before 2024, you have until Jan. 1, 2025 to submit your first BOI report,  If you establish or register your company on or after Jan.1, 2024, and before Jan. 1, 2025, you will have 90 calendar days to file your initial BOI report.  Companies created or registered on or after Jan. 1, 2025, you will have 30 calendar days to report.

Then, if there are any significant changes to your beneficial ownership information, you’ll need to update your reports within 30 days.

Why Does This Matter?

Making sure that this huge number of foreign and domestic businesses are legally compliant will help a lot in the broader fight against illicit financial activities. BOI reporting will go a long way toward making sure that these businesses can’t be used as shells for moving or hiding illegal funds.

This rule will also benefit the U.S. economy as a whole because it will protect both businesses and customers alike from the harms of fraud, forgery, and other deceitful financial practices.

What Businesses Need to Report

Compliant BOI reports will need to include specific details about each of the company’s beneficial owners and company applicants. This information will include their names, dates of birth, addresses, and a unique identifying number (e.g., from a passport or a driver’s license).

Who Qualifies as a Beneficial Owner?

Any individual who directly or indirectly exercises substantial control over the company is a beneficial owner.

The title also applies to anyone who owns or controls at least 25 percent of the ownership interests in the company.

How Can Businesses Make Sure They’re Compliant?

To ensure compliance, a business owner should start by thoroughly reviewing all individuals who may meet the criteria of either company applicants or beneficial owners. To do this well, you’ll need to analyze control mechanisms and ownership structures within your company.

Next, you’ll need to provide FinCEN with its required information before the deadline applicable to your business, keep detailed records, and provide updates to FinCEN if anything changes within your business.

What Are the Implications for Businesses and Banks?

Many business owners will first learn about this new BOI reporting requirement from their accountants or through financial news sources. Regardless of the way you find out, it’s important to internalize that this applies to you—and to get started on making sure you’re compliant!

Banks will continue to play a significant role in collecting beneficial ownership information. If you have questions about BOI reporting, reference the site, At BNC National Bank, we’re always here to help you work toward compliance and streamline your business’s finances. Reach out to our team for support, and, in the meantime, subscribe to our blog for further updates!

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