Beneficial Owner Information (BOI) Filing Under the Corporate Transparency Act

On January 1, 2024, the Beneficial Ownership Information (BOI) Reporting Rule, issued under the Corporate Transparency Act (CTA), came into effect, imposing new reporting requirements for companies formed in or registered to do business in the U.S. (collectively referred to as reporting companies). The CTA mandates that these companies disclose the identities of individuals who ultimately own or control at least 25% of the company or exercise significant control over it. 

The CTA aims to enhance transparency, reduce financial crimes like money laundering, and help law enforcement and financial institutions access detailed ownership information. The rule presents particular challenges for foreign-owned companies, which may have complex ownership structures, shifting management teams, and various compliance considerations. 

New CTA Reporting Requirements 

As part of the new regulations, reporting companies must file a BOI report with the Financial Crimes Enforcement Network (FinCEN). This report includes key details: 

• For the reporting company: The name, trade name, address, and either the EIN (Employer Identification Number) or TIN (Taxpayer Identification Number). 

• For each beneficial owner: Full legal name, date of birth, U.S. residential address, and a government-issued ID (e.g., passport, driver’s license) that includes an image. 

• For applicants (those who help form a company): Similar information as required for beneficial owners. 

Companies formed on or after January 1, 2024, must file a BOI report within 90 days of their formation or registration. However, companies formed before this date have a reprieve until January 1, 2025 to submit their reports. 

After filing the initial BOI report, companies must file updated reports within 30 days of any changes in the reported information, including changes in beneficial ownership. 

Limited Exemptions for Foreign-Owned Companies 

The CTA offers several exemptions from the reporting requirement. However, most exemptions do not apply to foreign-owned companies. A few exemptions that may apply include: 

1. Large Operating Company: Entities that directly employ more than 20 full-time employees in the U.S., have a physical U.S. office, and generate more than $5 million in gross receipts from U.S. sources are exempt from BOI reporting. 

2. Publicly-Traded Companies: Companies that have issued securities registered under the Securities Exchange Act of 1934 or file periodic information with the SEC are also exempt. However, foreign-listed companies with no U.S. reporting obligations are not exempt. 

3. Subsidiaries of Exempt Companies: If a parent company is exempt, its subsidiaries may also be exempt from reporting. 

However, there are no exemptions for holding companies, meaning foreign-owned U.S. subsidiaries may still be required to file. 

Reporting Challenges for Foreign-Owned Companies 

Foreign-owned companies face unique challenges in meeting the CTA’s reporting requirements: 

• Analyzing Corporate Structure: Foreign companies may have a holding company in the U.S. with subsidiaries under it. These companies must analyze each entity within their corporate structure to determine if they need to comply with the reporting requirements. 

• Frequent Changes in Leadership: Foreign companies often rotate executives within their U.S. subsidiaries, which can trigger the need for updated BOI filings. Compliance plans must be in place to monitor and manage these updates. 

• Inactive Entities: Companies with dormant U.S. subsidiaries may need to consider dissolving them to avoid potential reporting requirements or penalties. 

• Data Protection: Reporting companies must ensure they comply with data protection laws, especially when handling sensitive personally identifiable information. It’s advisable for foreign companies to consult with local counsel to ensure compliance with local privacy laws. 

Penalties for Non-Compliance and Personal Liability for Senior Officers 

Failure to comply with the CTA can result in severe penalties. Civil fines for non-compliance can be as high as $500 per day, up to a maximum of $10,000. Additionally, individuals who willfully fail to comply may face up to two years of imprisonment. 

Importantly, senior officers of companies that willfully violate the CTA may face personal liability for these penalties, emphasizing the need for companies to carefully manage and track their reporting obligations. 

How We Can Help 

Navigating the complexities of the BOI filing process can be challenging, particularly for foreign-owned companies with intricate structures. Our team of professionals and experts is well-equipped to guide you through these challenges, ensuring your company stays compliant with the CTA and avoids penalties. Whether you need help determining reporting obligations, filing reports on time, or managing updates, we are here to help streamline the process and ensure your business remains fully compliant. Reach out today for expert assistance!