BOI Reporting Essentials: Who is Considered a Beneficial Owner in Business?

Who Are Beneficial Owners? A Business Guide to the Corporate Transparency Act

In a significant legislative move, Congress enacted the Corporate Transparency Act in 2021, mandating that, from January 1, 2024, all businesses must disclose information about their beneficial owners. This change is expected to impact around 32 million businesses across the United States.

A wide array of businesses, both big and small, will be required to submit the Beneficial Ownership Information Report, except for a few specific exceptions. This report demands comprehensive personal details for each beneficial owner within a firm, which must be submitted to the Financial Crimes Enforcement Network (FinCEN). While the intent behind this requirement is commendable, it presents new challenges for business proprietors.

Legal consultation regarding beneficial ownership reporting, with a justice scale in the backdrop, reflecting the regulatory discussion

The Reasons for Mandating Beneficial Ownership Disclosures

The core objective of the Corporate Transparency Act is to combat and eradicate money laundering, tax evasion, terrorist financing, and similar illegal activities. Criminals often exploit corporations and LLCs for these purposes, as these entities traditionally haven’t required disclosures of beneficial owner information. With the 2024 mandate, both US-based and foreign entities conducting business in the US will need to disclose every beneficial owner’s details to FinCEN.

Which Businesses Are Required to Comply?

The scope of this mandate is extensive, with only a minimal number of exceptions. Entities required to report include:

  • U.S.-registered Limited Liability Companies (LLCs)
  • U.S.-registered Corporations (including S and C types)
  • Foreign LLCs and Corporations registered to conduct business in the US

However, about twenty-three categories, mainly those already under reporting obligations (like financial institutions and insurance companies), are exempt from this mandate.

Defining a Beneficial Owner

A beneficial owner is defined as an individual who either directly or indirectly exerts substantial control over, or owns at least 25% of, a company. To clarify the ambiguity around “substantial control,” FinCEN outlines specific criteria, including:

  • Senior officers (CEO, CFO, COO, etc.)
  • Individuals with the power to appoint or dismiss corporate officers or directors
  • Anyone making significant operational or structural decisions for the company

However, professionals like accountants and lawyers advising businesses do not fall under this definition, despite their role in critical decision-making.

Who Gets Access to Beneficial Ownership Data?

Reported information includes the business’s legal details and the beneficial owners’ personal information. Given the sensitive nature of this data, its access is restricted and not publicly available, with authorized access limited to specific scenarios by:

  • Domestic and international law enforcement agencies
  • Financial institutions
  • The US Department of Treasury

FinCEN stringently monitors access to this information to ensure it’s used only for legitimate purposes.

Compliance Timelines for Businesses

Understanding when to submit these reports is crucial, given the severe penalties for non-compliance. Existing businesses have until January 1, 2025, to file their report. New businesses established post-January 1, 2024, have a 90-day window post-registration for compliance. FinCEN is actively working on educating businesses about these new requirements.

Seek Expert Legal Assistance

For detailed guidance on the Beneficial Ownership Information Report or help with complex tax issues, get in touch with Corporate Transparency Filing Services. Our expertise spans tax audit representation, state tax disputes, and other tax-related matters. Contact us for expert advice and representation.


Corporate Transparency Act Filing Service

Corporate Transparency Act Filing Services

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