What You Need to Know About BOI Reporting

In 2022, the Financial Crimes Enforcement Network (FinCEN) issued a final ruling on implementing the beneficial ownership information (BOI) reporting requirements of the Corporate Transparency Act (CTA). 

The purpose of the CTA and new reporting requirement is to help the U.S. modernize its anti-money laundering efforts.

Unless you run your construction business as a sole proprietor, you will likely need to file a BOI report. It’s important to understand what beneficial ownership reporting is, when you need to file and what information you will need to provide.

What is Beneficial Ownership Reporting?

The new beneficial ownership reporting requirement stems from the Corporate Transparency Act. Enacted in 2021, the purpose of this reporting requirement is to curb illicit finance by making it harder for bad actors to use shell companies and other relevant means to engage in illicit financial activities. The rule applies to many businesses and went into effect on January 1, 2024.

The BOI report includes personal information about business owners. FinCEN estimates that 32.6 million entities will be impacted by the new reporting requirements.

Who is Considered a Beneficial Owner?

A beneficial owner is someone who meets one of the following requirements:

• Directly or indirectly owns or controls at least 25% of a company’s ownership interests.
• Directly or indirectly has “substantial control” over the company.

Even if a person doesn’t own a substantial percentage of the company’s stock or hold a formal title, they may still be considered a beneficial owner if they have a major influence on the decisions and activities of the entity. In fact, beneficial owners can be outside of the scope of ownership entirely. 

For many business owners, it may be a challenge to identify all beneficial owners. The term “substantial control” is subjective. But FinCEN believes that their 23 exemptions should be enough to clear the confusion.

The rules are complex here. Consider consulting with a professional to understand these rules and ensure compliance. 

Who Needs to File a Beneficial Ownership Report?

The beneficial ownership reporting requirements apply to most U.S. businesses. There are, of course, exceptions, including domestic sole proprietors.

The rule applies to two types of businesses:

• Domestic reporting companies. These are corporations, LLCs or other entities that are formed by filing a document with the Secretary of State or similar office.
• Foreign reporting companies. These are entities (corporations, LLCs, etc.) formed under the laws of foreign countries and are registered to do business in the U.S.

Unless your entity qualifies for an exemption, you will likely need to file a beneficial ownership report.

What Information Needs to be Provided in a BOI Report?

When filing a beneficial ownership report, you’ll need to provide the following information:

• Taxpayer identification number
• The legal name of the business or any DBA names
• The current address of the principal place of business in the U.S.
• The jurisdiction of registration or formation
• The names, dates of birth and addresses of all beneficial owners
• A unique identifying number from an identification document along with an image of that document

Who Will Have Access to This Information?

BOI reports contain personal information about beneficial owners, so it’s natural to be concerned about who will have access to this data.

According to FinCEN, the information collected in these reports will be kept in a private database and will not be publicly accessible. FinCEN was actually required to ensure they implemented protocols to safeguard BOI, built a secure system to store the information and established procedures to ensure only authorized persons had access to the information.

Authorized persons may include:

• The Treasury Department
• Federal agencies engaged in law enforcement, intelligence and national security
• Financial institutions (with consent from the company)
• State, local and Tribal law enforcement agencies with court orders
• Regulators of financial institutions when determining whether the company is complying with customer due diligence laws
• Certain foreign authorities making a request for information through a U.S. agency

If your company is ever dissolved or goes out of business, your BOI report will remain on file for at least five years.

When Do BOI Reports Need to be Filed?

The timeframe for BOI reporting will depend on when the company was formed. 

• Companies registered or created before January 1, 2024 will have until January 1, 2025 to file their initial BOI report.
• Entities created or registered after January 1, 2024 will have 90 days to file their BOI report.

The 90-day period starts when you receive notice that the creation or registration of your entity is effective.

You only need to file an initial BOI report, so this is not an annual reporting requirement. If the information on the report needs to be updated or corrected at any time, then you will need to file a new report. It’s your responsibility to keep track of the information you reported and to update the file whenever necessary.

How are Reports Filed and Is There a Fee?

FinCEN launched a website for submitting BOI reports on January 1, 2024. There is no fee for submitting your report.

If you are required to submit a BOI report, then you can file your report electronically using the secure E-filing system on the website linked above. 

What are the Penalties for Non-Compliance?

Although there are exceptions, the BOI reporting requirements will apply to most businesses. Failing to comply with these reporting requirements can result in a fine of:

• $500 per day
• Maximum fine of $10,000

Intentionally failing to file or provide inaccurate information is considered a felony offense and is punishable by up to two years in prison.

Final Thoughts

BOI reporting is yet another requirement that construction companies – and most other businesses – will need to be aware of and comply with. If the requirement applies to you, make sure that you file as soon as possible and that you fully understand who is considered a beneficial owner.

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