FinCEN offers additional guidance on BOI reporting
The Financial Crimes Enforcement Network (FinCEN) recently updated its list of FAQs to add or revise the answers to 25 questions addressing the filing of beneficial ownership information (BOI) reports. FinCEN’s extensive list of FAQs provides most of the agency’s guidance regarding the required filing of BOI reports.
Entities that meet reporting requirements created or registered with their secretary of state prior to 2024 must file their initial BOI report by Dec. 31, 2024. Those that were created or registered in 2024 have 90 days from the day they received notice they have been created or registered to file their initial BOI report. Beginning in 2025, newly created or registered entities will have 30 days from the date they were created or registered to file their report.
Notable items added to the FAQ include answers to questions addressing the following issues:
Freedom of Information Act
BOI reports to FinCEN are exempt from disclosure under the Freedom of Information Act (FOIA).
Non-attorney third-party submissions and the practice of law
Whether the submission of a BOI report by a third-party service provider that is not an attorney qualifies as the unauthorized practice of law is generally determined by state law. However, nothing in the Corporate Transparency Act (CTA) or FinCEN’s regulations prevent non-attorney third-party service providers from submitting reports on a company’s behalf if they have been authorized to do so.
Number of beneficial owners to report
A reporting company can have more than one beneficial owner who exercises substantial control, has ownership interests or both. There is no maximum number of beneficial owners who must be reported.
Nobody controls more than 25% of the company
FinCEN expects that every reporting company will be substantially controlled by one or more individuals and will be able to identify and report at least one beneficial owner.
Offices “similar” to the secretary of state
For BOI reporting purposes, most businesses are considered to have been created when the secretary of state or similar office has given notice that the creation or registration is effective. However, the term “similar office” is undefined in the statute.
According to FinCEN, a similar office is any office under the law of a state or tribe – including departments, agencies and bureaus – where or through which a domestic entity files a document to be created, or a foreign entity files a document to be registered to do business in the U.S.
Federal agencies are not similar offices.
Multiple beneficial owners
Multiple company applicants or beneficial owners can be added to a beneficial ownership report. The FAQ provides illustrated instructions on how to do that using FinCEN’s website.
Community property states
If both spouses own or control at least 25% of the ownership interest in a reporting company created or registered in a community property state, both spouses must be reported to FinCEN, unless an exception applies.
Corporate conversions
Depending on the law of a state or tribe and the type of entity undergoing conversion, filing for a conversion may result in the creation of a new domestic reporting company.
When the conversion results in a new domestic reporting company, it is required to file an initial BOI report. Additionally, some conversion filings that don’t create a new domestic reporting company may still require the submission of an updated BOI report.
For example, if a company that goes by the name “Company, Inc.” converts to an LLC and changes its name to “Company LLC,” it may be required to file an updated report because it is a change to required information that had previously been submitted.
Changes in jurisdiction
A reporting company must report the jurisdiction where it was originally created. But if it changes jurisdictions, the company must file an updated BOI report. For example, if a company ceases to be incorporated under California law and incorporates under Texas law, it must submit an updated BOI report.
Registering in other states
A reporting company that filed a BOI report based on its creation or registration in one state does not need to file additional BOI reports in connection with filings of secretaries of state or other offices in additional states when the registration only:
- Authorizes the existing domestic company under the laws of one state or tribe to do business under the laws of another state or tribe
- Authorizes a foreign reporting company already registered under the laws of one state or tribe to do business under the laws of another state or tribe
Updated or corrected FinCEN identifier information
Information that is used to request a FinCEN identifier (FinCEN ID) must be updated or corrected using a FinCEN identifier application. A FinCEN ID is a unique identification number issued by the agency that is not required but can simplify the reporting process.
Beneficial owners must report any change in the information submitted no later than 30 days after the change occurred. Individuals must correct any inaccuracies within 30 days of becoming aware of the inaccuracy or having reason to know about it. Reporting companies must update or correct their information by filing an updated or corrected BOI report, as necessary.