New Laws for Small Business Owners

As of January 1, 2024, new regulations mandate that certain small businesses in the United States must file Beneficial Ownership Information (BOI) reports with the Financial Crimes Enforcement Network (FinCEN).

Here’s an overview of the critical steps and requirements for compliance:

Who Needs to File?

Reporting Companies:

1. Domestic Reporting Companies: Entities created by filing documents with a secretary of state or similar office in the U.S.
2. Foreign Reporting Companies: Entities formed under foreign laws and registered to do business in the U.S.

Exemptions: Some entities are exempt from these reporting requirements, including:

• Large operating companies with over 20 full-time employees in the U.S. and more than $5 million in gross receipts.
• Certain regulated entities like banks and credit unions.

Identifying Beneficial Owners

A beneficial owner is any individual who:

• Exercises substantial control over a reporting company, or
• Owns or controls at least 25% of the ownership interests of a reporting company.

Information Required in BOI Reports

For Reporting Companies:

• Full legal name
• Trade names or “doing business as” (DBA) names
• Current U.S. address of the principal place of business
• Jurisdiction of formation
• IRS Taxpayer Identification Number (TIN) or a tax identification number issued by a foreign jurisdiction

For Each Beneficial Owner and Company Applicant:

• Full legal name
• Date of birth
• Current address (residential for individuals, business for those forming companies)
• Unique identifying number from a non-expired document (passport, driver’s license, etc.)
• An image of the identification document used

Special Considerations for Trusts

Beneficial owners can control or own reporting companies through trusts by:

• Exercising substantial control via trust arrangements
• Owning or controlling ownership interests held in a trust

Trustees, certain beneficiaries, and grantors can be considered beneficial owners if they:

• Have authority over trust assets
• Are sole recipients of trust income and principal
• Have the right to revoke the trust

Reporting Process

1. Access the Form: Visit FinCEN’s BOI E-Filing website and select “File BOIR.”
2. Fill Out the Form: Enter the required information for the reporting company, beneficial owners, and, if applicable, company applicants.
3. Submit the Form: Complete the submission electronically through the secure filing system.

Who Can File?

Any authorized person, such as an employee, owner, or third-party service provider, can file a BOI report on behalf of the reporting company.

Exemptions to Note

Entities that might be exempt from filing include:

• Large operating companies
• Certain regulated entities
• Subsidiaries of exempt entities

For a comprehensive list of exemptions, visit the FinCEN FAQ.

Ensuring Compliance

To ensure your company meets these new requirements:

• Determine whether your company is a domestic or foreign reporting company.
• Identify all beneficial owners and, if applicable, company applicants.
• Use secure systems for collecting and submitting the required information, like Clio, to protect privacy and streamline the process.

By understanding and adhering to these new regulations, small business owners can avoid penalties and ensure their companies remain in good standing. For more detailed information, visit FinCEN’s Beneficial Ownership Information.