The Law Offices of Nick Spradlin, PLLC 

Frequently Asked Questions

A.1.      What is beneficial ownership information?

 

Beneficial ownership information refers to identifying information about the individuals who directly or indirectly own or control a company.

 

A.2.      Why do companies have to report beneficial ownership information to the U.S Department of the Treasury?

In 2021, Congress passed the Corporate Transparency Act on a bipartisan basis. This law creates a new beneficial ownership information reporting requirement as part of the U.S. government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.

 

A.3.      Under the Corporate Transparency Act, who can access beneficial ownership information?

FinCEN will permit Federal, State, local, and Tribal officials, as well as certain foreign officials who submit a request through a U.S. Federal government agency, to obtain beneficial ownership information for authorized activities related to national security, intelligence, and law enforcement. Financial institutions will have access to beneficial ownership information in certain circumstances, with the consent of the reporting company. Those financial institutions’ regulators will also have access to beneficial ownership information when they supervise the financial institutions.

FinCEN published the rule that will govern access to and protection of beneficial ownership information on December 22, 2023. Beneficial ownership information reported to FinCEN will be stored in a secure, non-public database using rigorous information security methods and controls typically used in the Federal government to protect non-classified yet sensitive information systems at the highest security level. FinCEN will work closely with those authorized to access beneficial ownership information to ensure that they understand their roles and responsibilities in using the reported information only for authorized purposes and handling in a way that protects its security and confidentiality.

 

A.4.    How will companies become aware of the BOI reporting requirements?

 

FinCEN is engaged in a robust outreach and education campaign to raise awareness of and help reporting companies understand the new reporting requirements.

That campaign involves virtual and in-person outreach events and comprehensive guidance in a variety of formats and languages, including multimedia content and the Small Entity Compliance Guide, as well as new channels of communication, including social media platforms. FinCEN is also engaging with governmental offices at the federal and state levels, small business and trade associations, and interest groups.

FinCEN will continue to provide guidance, information, and updates related to the BOI reporting requirements on its BOI webpage, www.fincen.gov/boi. Subscribe here to receive updates via email from FinCEN about BOI reporting obligations.

 

B. Reporting Process

 

B.1.      Should my company report beneficial ownership information now?

 

FinCEN launched the BOI E-Filing website for reporting beneficial ownership information (https://boiefiling.fincen.gov) on January 1, 2024.

•     A reporting company created or registered to do business before January 1,

2024, will have until January 1, 2025, to file its initial BOI report.

 

•     A reporting company created or registered in 2024 will have 90 calendar days to file after receiving actual or public notice that its creation or registration is effective.

•     A reporting company created or registered on or after January 1, 2025, will have 30 calendar days to file after receiving actual or public notice that its creation or registration is effective.

[Updated January 4, 2024]

 

B.2.     When do I need to report my company’s beneficial ownership information to FinCEN?

A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial beneficial ownership information report.

A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report. This 90-calendar day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.

 

Reporting companies created or registered on or after January 1, 2025, will have 30 calendar days from actual or public notice that the company’s creation or registration is effective to file their initial BOI reports with FinCEN.

 

B.3.      When will FinCEN accept beneficial ownership information reports?

 

FinCEN will begin accepting beneficial ownership information reports on January 1,

2024. Beneficial ownership information reports will not be accepted before then.

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B.4.    Will there be a fee for submitting a beneficial ownership information report to FinCEN?

No. There is no fee for submitting your beneficial ownership information report to FinCEN.

 

B.5.    How will I report my company’s beneficial ownership information?

 

If you are required to report your company’s beneficial ownership information to FinCEN, you will do so electronically through a secure filing system available via FinCEN’s BOI E-Filing website (https://boiefiling.fincen.gov).

 

B.6.     Where can I find the form to report?

 

Access the form by going to FinCEN’s BOI E-Filing website (https ://boiefiling. fincen.gov) and select “File BOIR.”

 

B.7.    Is a reporting company required to use an attorney or a certified public accountant (CPA) to submit beneficial ownership information to FinCEN?

No.  FinCEN expects that many, if not most, reporting companies will be able to submit their beneficial ownership information to FinCEN on their own using the guidance FinCEN has issued. Reporting companies that need help meeting their reporting obligations can consult with professional service providers such as lawyers or accountants.

 

B.8.    Who can file a BOI report on behalf of a reporting company, and what information will be collected on filers?

Anyone whom the reporting company authorizes to act on its behalf—such as an employee, owner, or third-party service provider—may file a BOI report on the reporting company’s behalf. When submitting the BOI report, individual filers should be prepared to provide basic contact information about themselves, including their name and email address or phone number.

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C. Reporting Company

 

C.1.      What companies will be required to report beneficial ownership information to FinCEN?

Companies required to report are called reporting companies. There are two types of

reporting companies:

 

•     Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.

•     Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.

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C.2.      Are some companies exempt from the reporting requirement?

 

Yes, 23 types of entities are exempt from the beneficial ownership information reporting requirements. These entities include publicly traded companies meeting specified requirements, many nonprofits, and certain large operating companies.

The following table summarizes the 23 exemptions:

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Exemption No.      Exemption Short Title

 

1                   Securities reporting issuer

2                   Governmental authority

3                   Bank

4                   Credit union

5                   Depository institution holding company

6                   Money services business

7                   Broker or dealer in securities

8                   Securities exchange or clearing agency

9                   Other Exchange Act registered entity

10                 Investment company or investment adviser

11                 Venture capital fund adviser

12                  Insurance company

13                  State-licensed insurance producer

14                  Commodity Exchange Act registered entity

15                  Accounting firm

16                  Public utility

17                  Financial market utility

18                  Pooled investment vehicle

19                  Tax-exempt entity

20                  Entity assisting a tax-exempt entity

21                  Large operating company

22                  Subsidiary of certain exempt entities

23                  Inactive entity

 

 

FinCEN’s Small Entity Compliance Guide includes this table and checklists for each of the 23 exemptions that may help determine whether a company meets an exemption (see Chapter 1.2, “Is my company exempt from the reporting requirements?”). Companies should carefully review the qualifying criteria before concluding that they are exempt. Please see additional FAQs about reporting company exemptions in “L. Reporting Company Exemptions” below.

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C.3.      Are certain corporate entities, such as statutory trusts, business trusts, or foundations, reporting companies?

It depends. A domestic entity such as a statutory trust, business trust, or foundation is a reporting company only if it was created by the filing of a document with a secretary of state or similar office. Likewise, a foreign entity is a reporting company only if it filed a document with a secretary of state or a similar office to register to do business in the United States.

State laws vary on whether certain entity types, such as trusts, require the filing of a document with the secretary of state or similar office to be created or registered.

•     If a trust is created in a U.S. jurisdiction that requires such filing, then it is a reporting company, unless an exemption applies.

Similarly, not all states require foreign entities to register by filing a document with a secretary of state or a similar office to do business in the state.

•     However, if a foreign entity has to file a document with a secretary of state or a similar office to register to do business in a state, and does so, it is a reporting company, unless an exemption applies.

Entities should also consider if any exemptions to the reporting requirements

apply to them. For example, a foundation may not be required to report beneficial ownership information to FinCEN if the foundation qualifies for the tax-exempt entity exemption.

Chapter 1 of FinCEN’s Small Entity Compliance Guide (“Does my company have to report its beneficial owners?”) may assist companies in identifying whether they need to report.

 

C.4.      Is a trust considered a reporting company if it registers with a court of law for the purpose of establishing the court’s jurisdiction over any disputes involving the trust?

No.  The registration of a trust with a court of law merely to establish the court’s jurisdiction over any disputes involving the trust does not make the trust a reporting company.

 

C.5.      Does the activity or revenue of a company determine whether it is a reporting company?

Sometimes. A reporting company is (1) any corporation, limited liability company, or other similar entity that was created in the United States by the filing of a document with a secretary of state or similar office (in which case it is a domestic reporting company), or any legal entity that has been registered to do business in the United States by the filing of a document with a secretary of state or similar office (in which case it is a foreign reporting company), that (2) does not qualify for any of the exemptions provided under the Corporate Transparency Act.  An entity’s activities and revenue, along with other factors in some cases, can qualify it for

 

 

one of those exemptions. For example, there is an exemption for certain inactive entities, and another for any company that reported more than $5 million in gross receipts or sales in the previous year and satisfies other exemption criteria. Neither engaging solely in passive activities like holding rental properties, for example,

nor being unprofitable necessarily exempts an entity from the BOI reporting

requirements.

 

FinCEN’s Small Entity Compliance Guide provides additional information concerning exemptions in Chapter 1.2, “Is my company exempt from the reporting requirements?”

 

C.6.      Is a sole proprietorship a reporting company?

 

No, unless a sole proprietorship was created (or, if a foreign sole proprietorship, registered to do business) in the United States by filing a document with a secretary of state or similar office. An entity is a reporting company only if it was created

(or, if a foreign company, registered to do business) in the United States by filing such a document. Filing a document with a government agency to obtain (1) an IRS employer identification number, (2) a fictitious business name, or (3) a professional or occupational license does not create a new entity, and therefore does not make a sole proprietorship filing such a document a reporting company.

 

C.7.      Can a company created or registered in a U.S. territory be considered a reporting company?

Yes. In addition to companies in the 50 states and the District of Columbia, a company that is created or registered to do business by the filing of a document with a U.S. territory’s secretary of state or similar office, and that does not qualify for any exemptions to the reporting requirements, is required to report beneficial ownership information to FinCEN. U.S. territories are the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, Guam, and the U.S. Virgin Islands.

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D. Beneficial Owner

 

D.1.      Who is a beneficial owner of a reporting company?

 

A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control (see Question D.2) over the reporting company, or (2) owns or controls at least 25% of the reporting company’s ownership interests.

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D.2.    What is substantial control?

 

An individual can exercise substantial control over a reporting company in four different ways. If the individual falls into any of the categories below, the individual is exercising substantial control:

•     The individual is a senior officer (the company’s president, chief financial officer, general counsel, chief executive office, chief operating officer, or any other officer who performs a similar function).

•     The individual has authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company.

•     The individual is an important decision-maker for the reporting company.

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D.3.    One of the indicators of substantial control is that the individual is an important decision-maker. What are important decisions?

Important decisions include decisions about a reporting company’s business, finances, and structure. An individual that directs, determines, or has substantial influence over these important decisions exercises substantial control over a reporting company.

 

D.4.    What is an ownership interest?

 

An ownership interest is generally an arrangement that establishes ownership

rights in the reporting company. Examples of ownership interests include shares of equity, stock, voting rights, or any other mechanism used to establish ownership.

 

D.5.    Who qualifies for an exception from the beneficial owner definition?

 

There are five instances in which an individual who would otherwise be a beneficial owner of a reporting company qualifies for an exception. In those cases, the reporting company does not have to report that individual as a beneficial owner to FinCEN.

 

D.6.    Is my accountant or lawyer considered a beneficial owner?

 

Accountants and lawyers generally do not qualify as beneficial owners, but that may

depend on the work being performed.

 

Accountants and lawyers who provide general accounting or legal services are not considered beneficial owners because ordinary, arms-length advisory or other third-party professional services to a reporting company are not considered to be “substantial control” (see Question D.2). In addition, a lawyer or accountant who is designated as an agent of the reporting company may qualify for the “nominee, intermediary, custodian, or agent” exception from the beneficial owner definition.

However, an individual who holds the position of general counsel in a reporting company is a “senior officer” of that company and is therefore a beneficial owner

 

D.7.    What information should a reporting company report about a beneficial owner who holds their ownership interests in the reporting company through multiple exempt entities?

If a beneficial owner owns or controls their ownership interests in a reporting company exclusively through multiple exempt entities, then the names of all of those exempt entities may be reported to FinCEN instead of the individual beneficial owner’s information.

» Note that this special rule does not apply when an individual owns or controls ownership interests in a reporting company through both exempt and non-exempt entities. In that case, the reporting company must report the individual as a beneficial owner (if no exception applies), but the exempt companies do not need to be listed.

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D.8.    Is an unaffiliated company that provides a service to the reporting company by managing its day-to-day operations, but does not make decisions on important matters, a beneficial owner of the reporting company?

The unaffiliated company itself cannot be a beneficial owner of the reporting company because a beneficial owner must be an individual. Any individuals that exercise substantial control over the reporting company through the unaffiliated company must be reported as beneficial owners of the reporting company. However, individuals who do not direct, determine, or have substantial influence over important decisions made by the reporting company, and do not otherwise exercise substantial control, may not be beneficial owners of the reporting company.

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D.9.    Is a member of a reporting company’s board of directors always a beneficial owner of the reporting company?

No.  A beneficial owner of a company is any individual who, directly or indirectly, exercises substantial control over a reporting company, or who owns or controls at least 25 percent of the ownership interests of a reporting company.

Whether a particular director meets any of these criteria is a question that the reporting company must consider on a director-by-director basis.

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D.10. Is a reporting company’s designated “partnership representative” or “tax matters partner” a beneficial owner?

It depends. A reporting company’s “partnership representative,” as defined in

26 U.S.C. 6223, or “tax matters partner,” as the term was previously defined in now-repealed 26 U.S.C. 6231(a)(7), is not automatically a beneficial owner of

the reporting company. However, such an individual may qualify as a beneficial owner of the reporting company if the individual exercises substantial control over the reporting company, or owns or controls at least 25 percent of the company’s ownership interests.

Note that a “partnership representative” or “tax matters partner” serving in the role of a designated agent of the reporting company may qualify for the “nominee, intermediary, custodian, or agent” exception from the beneficial owner definition.

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D.11. What should a reporting company report if its ownership is in dispute?

 

If ownership of a reporting company is the subject of active litigation and an initial BOI report has not been filed, a person authorized by the company to file its beneficial ownership information should comply with the requirements by reporting:

 

•     all individuals who exercise substantial control over the company, and

•     all individuals who own or control, or have a claim to ownership or control of, at least 25 percent ownership interests in the company.

 

If an initial BOI report has been filed, and if the resolution of the litigation leads to the reporting company having different beneficial owners from those reported (for example, because some individuals’ claims to ownership or control have been

rejected), the reporting company must file an updated BOI report within 30 calendar

days of resolution of the litigation.

 

D.12.  Who does a reporting company report as a beneficial owner if a corporate entity owns or controls 25 percent or more of the ownership interests of the reporting company?

Ordinarily, such a reporting company reports the individuals who indirectly either (1) exercise substantial control over the reporting company or (2) own or control at least 25 percent of the ownership interests in the reporting company through the corporate entity. It should not report the corporate entity that acts as an intermediate for the individuals.

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Two special rules create exceptions to this general rule in very specific circumstances:

 

1.  A reporting company may report the name(s) of an exempt entity or entities in lieu of an individual beneficial owner who owns or controls ownership interests in the reporting company entirely through ownership interests in the exempt entity or entities; or

2.  If the beneficial owners of the reporting company and the intermediate company are the same individuals, a reporting company may report the FinCEN identifier and full legal name of an intermediate company through which an individual is a beneficial owner of the reporting company.

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