What Entities are Required to Collect and Report Beneficial Ownership Information?

With the passing of the Corporate Transparency Act of 2021 (CTA), some businesses are required to report their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). Entities formed in 2024, in particular, will be subject to the reporting rules beginning this year.

What is Beneficial Ownership Information Reporting?

Certain businesses must provide basic information about the entity, as well as information on those who own or control those entities. Due to the civil and criminal penalties associated with noncompliance, it’s important to understand if your business is subject to reporting.

What Entities are Required to Collect and Report Beneficial Ownership Information?

The first step to this program is identifying your reporting company. A reporting company meets the following definition:

• Corp, LLC, or similar entity that is:
• Created by filing a document with any domestic secretary of state or Indian Tribe, or
• Formed under the laws of a foreign country and registered with any domestic secretary of state or Indian Tribe to do business in the US.
• Not of an entity type specifically exempted under the Corporate Transparency Act (CTA).

If your company meets the definition of a reporting company, then you must file a report.

What Entities are Exempt from Collecting and Reporting Beneficial Ownership Information?

The CTA does not require an entity to report beneficial ownership information if it can be categorized in at least one of 23 types of entities exempted from the reporting obligation:

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 provider
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 companies
23. Inactive entity

However, there are many nuances to these exemptions, so you must reference FinCEN guidance if you think your business is exempted from filing. For example, the requirements behind the large operating company exemption state a company must:

• Employ more than 20 full-time employees in the U.S.,
• Have filed federal income tax returns in the U.S. demonstrating more than $5 million in gross receipts or sales in the previous year (including the receipts or sales of subsidiaries and other entities through which the entity operates), and
• Have an operating presence at a physical office within the U.S.

In addition, if an entity is initially exempted from reporting, a future change in entity activity or classification could unexpectedly trigger a future filing requirement.

When Does Beneficial Ownership Information Reporting Begin?

FinCEN will begin accepting reports on Jan. 1, 2024, but when your company may be required to report will depend on when your company was (or is) established.

If there is any change to a report that has been already made with FinCEN (such as new address, new contact information, change in control or correction of information), you must report changes within 90 days after the change is made or the error is discovered. Additionally, if your company previously qualified for an exemption, but no longer qualifies, you are required to file a BOI report within 90 calendar days of the date your company stops qualifying for exemption.

Contact Jason Jones or a member of your service team to discuss this topic further.

Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.