Modern business structures are going global, getting bigger and obviously, becoming more complex. This growing complexity has led to concerns over the transparency of business structures worldwide. To counteract risks related to this ambiguity in structures, and understand who’s actually at the tail end when you draw up the organizational chart, different jurisdictions have enforced different reporting.
For instance, in India, a form BEN-2 is filed with the Ministry of Corporate Affairs to report the ultimate beneficial owner of a corporate shareholder. Similarly, in Singapore, it’s mandatory for companies to report their significant beneficial owners to the Accounting and Corporate Regulatory Authority through the Register of Controllers.
The US Corporate Transparency Act was passed in 2021 to increase transparency of opaque ownership structures, requiring companies to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). FinCEN launched a portal to file the Beneficial Ownership Information (BOI) on January 1 2024 for the companies to file a BOI report with the State. Here’s everything you need to know about it.
Who Is a Beneficial Owner of a Reporting Company?
A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over the reporting company, or (2) owns or controls at least 25% of the reporting company’s ownership interests.
Beneficial owners must be individuals (i.e., natural persons), and trusts, corporations, or other legal entities are not considered to be beneficial owners. However, in specific circumstances, information about an entity may be reported instead information about a beneficial owner.
Who Has to File Beneficial Ownership Information?
Domestic reporting companies including corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar US office
Foreign reporting companies including corporations and limited liability companies which are formed under the law of a foreign country but are registered to do business in the US by the filing of a document with a secretary of state or any similar office.
Is Every Type of Company Required to Report Boi?
The law has exempted 23 types of entities, as of now, from the reporting requirement. These include banks, governmental authorities, money service businesses, insurance companies, accounting firms, pooled investment vehicles, tax-exempt entities, security brokers, credit unions, security exchange and clearing agencies, inactive entities, and others.
What Is the Reporting Timeline?
| S.No | Criteria | Due Date |
| 1 | Reporting company incorporated before January 1, 2024 | Before January 1, 2025 |
| 2 | Reporting company incorporated after January 1, 2024 | Within 90 days of date of incorporation |
| 3 | Reporting company incorporated on or after January 1, 2025 | Within 30 days of the date of incorporation |
| 4 | Any changes to the ownership structure or control | Within 30 days of such change |
Are There Any Penalties for Non-reporting?
The Act prescribes a civil penalty of USD 500 per day for continuing default, and criminal penalty of up to USD 10,000, and imprisonment for up to two years. FinCEN also provides a window of 90 days to make a correction or addition to the filing already done.
Due to the heavy penalties involved, it’s important to file the report, if not done already. If you are facing any difficulty in understanding the law or reporting, please reach out to us at info@indigenesis.com.
