A Reporting Company is generally a legal entity that is either created or qualified to do business by a filing with a secretary of state or equivalent office (Secretary of State). Common Reporting Companies include limited liability companies and corporations.
Reporting Companies that were in existence by December 31, 2023, have until January 1, 2025, to complete initial BOI reporting. However, there is a more
immediate impact for Reporting Companies that are formed or qualified to do business on or after January 1, 2024 (New Reporting Companies). In 2024, New
Reporting Companies must file their BOI reporting within ninety (90) days of entity formation or qualification to avoid potential costs of non-compliance. After 2024, New Reporting Companies will only have thirty (30) days to file their initial BOI reporting.
The BOI information center provides a direct link to the FinCEN filing portal for Reporting Companies.
Filing Exemptions
A complete list of the compliance exemptions is available at the FinCEN BOI information center and also on the CCM CTA Resource Library webpage.
Generally, organizations that are already subject to significant federal oversight and large operating companies will benefit from one of the BOI reporting
exemptions. Two exemptions that are expected to alleviate the filing obligations for many Reporting Companies are the Large Operating Company and Inactive
Company exemptions.
The Large Operating Company Exemption
The Large Operating Company Exemption applies to companies with more than 20 full time employees in the United States, a physical office in the U.S., and a filed federal income tax return for the previous year showing more than $5 million in gross sales or receipts within the U.S.
The Inactive Company Exemption
The Inactive Company Exemption applies if all of the below apply: (i) the entity existed on or before January 1, 2020; (ii) the entity is not engaged in active
business; (iii) the entity has not experienced any change in ownership; (iv) the entity has not sent or received any funds in an amount greater than $1,000 during the preceding twelve-month period; (v) the entity does not otherwise hold assets, including other entity interests; and (vi) the entity is not owned by a foreign person.
Exemptions May Not Apply to all Reporting Companies of an Organization
Business Owners and executive management should not stop their analysis of BOI reporting if they qualify for the Large Operating Company Exemption and should take care to review all entities that they own or control, to ensure that ancillary entities are also in compliance. In many cases, the Large Operating Company Exemption will exempt filing for a large operating company, but the exemption may not apply to commonly used real estate holding companies owned by the business owners, separate company divisions, or other small Reporting Companies they may operate, control or invest in.
Personal Information Reported and Updated Timely
Absent an applicable BOI reporting exemption, Reporting Companies will need to report the full legal name, date of birth, current residential address, unique ID number from an acceptable ID document, and an image of that document for: (1) holders of 25% or more of the ownership interests in the Reporting Company, and (2) individuals having substantial control over the Reporting Company. Substantial Control means: (i) the individual is a senior officer, (ii) the individual has authority to appoint or remove certain officers or a majority of directors of the Reporting Company; (iii) the individual is an important decision-maker; or (iv) the individual has any other form of substantial control over the Reporting Company. Information reported to FinCEN will also need to be updated promptly, within thirty (30) days of any change.
FinCEN Identifier
Business owners and individuals having substantial control over a Reporting Company may want to obtain an optional FinCEN Identifier (FinCEN ID) to simplify
reporting and to safeguard the sharing of sensitive personal information with companies that they own or control. An individual subject to BOI reporting can
simply provide the Reporting Company with their FinCEN ID, instead of providing their personal identification records for each Reporting Company they are
affiliated with. The BOI information center provides a direct link to the FinCEN ID application portal.
Company Applicant Reporting
Reporting Companies created or registered on or after January 1, 2024, also need to report the personal information of the individuals who act to organize the Company, referred to as the “Company Applicant.” Each Reporting Company will have to identify at least one (and at most two) Company Applicants. A
Company Applicant is the individual who actually files the document with the Secretary of State, or the individual who was primarily responsible for directing or controlling the filing action. Company Applicants must report the same information that is required for 25% owners and those with Substantial Control over
a Reporting Company.
Time is of the essence to evaluate whether you own or have Substantial Control over a Reporting Company, whether a reporting exemption is available; and if
not, which members of the organization are subject to BOI reporting rules. Failure to create and maintain an accurate record could result in civil or criminal
penalties.
CCM will continue to monitor changes to the BOI reporting requirements under the CTA. For more information, visit the CCM CTA Resource Library at www.ccmlawyer.com.
This article is provided for informational purposes by Western DuPage Chamber of Commerce Member Phillip Salerno of Clingen, Callow & McLean, LLC. You can reach Phil at salerno@ccmlawyer.com.
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