What Information Are You Required in Your Entity’s BOI Report?

As of January 1, 2024, the Corporate Transparency Act (CTA) requires reporting companies to file Beneficial Ownership Information (BOI) reports with FinCEN, the Department of Treasury’s Financial Crime Enforcement wing. White collar criminals have utilized the corporate form for decades to conceal illicit financial activity including money laundering, terrorist financing, and tax fraud. Congress enacted the CTA to prevent individuals from utilizing U.S. entities to hide behind the corporate form and facilitate illegal operations.

BOI reports require the reporting company to provide information about the company itself including its official name, any “doing business as” (DBA) name, its address, and its employer identification number (EIN). The report must also include the personal identifying information for each beneficial owner of the entity; personal identifying information includes the name, date of birth, physical home address, and a photograph of the individual. The photograph must be from a current U.S. passport, current U.S. driver’s license, or any official non-expired identification document issued by a State, local government, or Indian tribe. Each BOI report will be compiled in a private database available for use by law enforcement agencies to combat white collar crimes and other illicit business activities. The database will not be available to the public.

Who is a Beneficial Owner?

An individual is a beneficial owner who, directly or indirectly, either (1) exercises substantial control over the respective reporting company or (2) owns or controls at least 25 percent of the reporting company’s ownership interests. Treasury regulations define these elements in further detail.

Senior officers of the reporting company and individuals with authority over the appointment or removal of any senior officer exercise substantial control over the reporting company. This includes any person who holds the position of president, chief financial officer, general counsel, chief operations officer, COO, or any other officer who performs a similar function. Additionally, the “substantial control” element is broad enough to cover any individual that has substantial influence over important decisions made by the reporting company. Individuals make important decisions whenever they have the power to authorize the sale and transfer of principal assets, reorganizations, dissolution, major expenditures, issuances of equity, significant contracts, compensation schemes for senior officers, and amendments to governing documents. If the individual is involved in the decision-making process for any of these events, then the individual is likely a beneficial owner; consequently, that individual must be listed on the reporting company’s BOI report.

When determining whether an individual owns or controls at least 25 percent of the ownership interests for an entity that issues shares of stock, the applicable ownership percentage is calculated based on the “vote or value” doctrine. Under this approach, an individual’s ownership interest is the greater of (1) the individual’s total combined voting power interests as a percentage of the entity’s total outstanding voting power or (2) the total combined value of the total ownership interests of the individual as a percentage of the total outstanding value of ownership interests. If the entity issues capital and profit interests, the individual’s share of the capital and profit interests are compared to the total outstanding capital and profit interests of the entity.

There are certain classes of people who are excluded from the definition of a beneficial owner. Minor children and individuals with future interest through a right of inheritance are not included in BOI reports. Employees of the company, whose substantial control over economic benefits derive solely from their employment status, are also not required to identify themselves in the BOI report. Individuals acting as an intermediary, custodian, or agent on behalf of an individual reported in the BOI report are also excluded.

Wondering if this Statute Will Affect You? We Are Here to Help.

The CTA harshly penalizes any individual, reporting company, or other entity who fails to file a BOI report to FinCEN. Fines can start at $10,000 and can accrue $500 each day a report is outstanding. Every health care service provider should prioritize checking their entity structure to make sure they comply with the CTA’s reporting requirements if they fall under its purview. If you are operating a business that requires you as the owner to file documents with the Secretary of State or under a similar state law entity, your business likely needs to file a BOI report before the January 1, 2025, deadline. Call the law offices of Howell, Buchan & Strong at (850) 877-7776 now to arrange a free, no obligation consultation to discuss your business entity structure and whether it is subject to CTA reporting requirements.