From the SEMA Washington, D.C., office
Most small businesses have until December 31, 2024, to file a new, required report with the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) on their organization's beneficial owners. Beneficial ownership information (BOI) reports are a requirement under the Corporate Transparency Act (CTA), a 2021 federal law to enhance transparency in entity structures and ownership to combat money laundering, tax fraud, and other illicit activities. The CTA imposes reporting obligations on all business entities within the scope of the "reporting company" definition under the statute.
However, small businesses can be exempted from filing a report with FinCEN if they meet the following three criteria:
- Employ more than 20 employees;
- Operate a physical office in the U.S.; and
- Filed federal tax returns demonstrating more than $5 million in gross receipts or sales.
The CTA defines a "beneficial owner" as an individual who, directly or indirectly, exercises substantial control over the reporting company or owns or controls at least 25% of the ownership interests of the reporting company. An individual exercises "substantial control" over an entity if the individual:
- Serves as a senior officer.
- Has authority over the appointment or removal of a senior officer or a majority of the board of directors.
- Directs, determines or has substantial influence over important business decisions.
Beneficial ownership information reporting is not an annual requirement. Businesses only must file a report with FINCEN once unless the filer needs to update or correct information about their company's beneficial ownership. Generally, reporting companies must provide four pieces of information about each beneficial owner:
- Name.
- Date of birth.
- Address.
- The identifying number and issuer from either a non-expired U.S. driver's license, a non-expired U.S. passport or a non-expired identification document issued by a State (including a U.S. territory or possession), local government, or Indian tribe. If none of those documents exist, a non-expired foreign passport can be used. An image of the document must also be submitted.
Companies must also submit certain information about themselves, such as their name(s) and address. In addition, reporting companies created on or after January 1, 2024, must submit information about the individuals who formed the company ("company applicants").
Filers can also view informational videos and webinars, find answers to frequently asked questions, connect to the contact center and learn more about how to report at fincen.gov/boi. Also, SEMA member companies can listen to a webinar on the BOI reporting requirements here. There is no charge for SEMA members, as the association is a member of the Small Business Legislative Council (SBLC), which hosted the webinar. Click here to register for the webinar replay.
For more information, contact Eric Snyder, SEMA's senior director of federal government affairs, at erics@sema.org.