Warning: Legal Consequences of Filing a False FinCEN BOI Report

This article is a must-read for every person who will file a FinCEN BOI Report. Do not file a FinCEN BOI report unless you understand the legal consequences of filing a false report which is explained in this article.

If you submit or intend to submit a FinCEN Beneficial Owner Information report you need to understand that you can be fined and/or imprisoned if you file a FinCEN BOI report that contains false or fraudulent information. People who file FinCEN reports for companies [. . .]

Who can Access Beneficial Ownership Information in a FinCEN Report?

Question: Who can access beneficial ownership information in a FinCEN BOI report?

Answer: FinCEN will permit Federal, State, local, and Tribal officials, as well as certain foreign officials who submit a request through a U.S. Federal government agency, to obtain beneficial ownership information for authorized activities related to national security, intelligence, and law enforcement. Financial institutions will have access to beneficial ownership information in certain circumstances, with the consent of the reporting company. Those financial institutions’ regulators will also have access to beneficial ownership information when they supervise the [. . .]

What IDs are Acceptable on FinCEN BOI Reports?

Question: What are some acceptable forms of identification that will meet the reporting requirement?

Answer: The only acceptable forms of identification are:

A non-expired U.S. driver’s license (including any driver’s license issued by a commonwealth, territory, or possession of the United States);
A non-expired identification document issued by a U.S. state or local government, or Indian Tribe;
A non-expired passport issued by the U.S. government; or
A non-expired passport issued by a foreign government [. . .]

What Applicant Information Is in a FinCEN BOI Report?

Question: What information will a reporting company have to report about its company applicants?

Answer: For each individual who is a company applicant, a reporting company will have to provide:

The individual’s name;
Date of birth;
Address; and
An identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of the identification document.

The reporting company will also have to report an image of the [. . .]

What is a FinCEN Report Applicant?

Question: What is an applicant and when does a reporting company have to include applicant information in its FinCEN report filed under the Corporate Transparency Act.

Answer: All reporting companies formed after 2023 must include applicant information in their FinCEN report. Reporting companies formed before 2024 do not include applicant information in their FinCEN reports.

An applicant is individual who forms a reporting company by filing an application to form a corporation, limited liability company, or other similar entity under the laws of [. . .]

Who is the Beneficial Owner of a Company Owned by Another Company?

Question: Homer Simpson and Marge Simpson own 25% of World Wide Widgets, LLC, as community property. Ned Flanders, a single man, owns 75% of the LLC. World Wide Widgets, LLC, owns 100% of two subsidiary LLCs called Sub 1, LLC and Sub 2, LLC. Which companies must file FinCEN reports and who is/are the beneficial owner(s) that must be named in the FinCEN report?

Answer: Each company must file a FinCEN report. Ned, Homer and Marge are all deemed to be beneficial owners of all three [. . .]

Kill Your Inactive Entities

Question: I have an LLC that I formed years ago that is dormant. It does not have any assets or get any income. It is not operating a business. Will my inactive LLC have to file a FinCEN report that contains beneficial owner information?

Answer: Yes if it exists on January 1, 2025. To avoid filing a FinCEN report and the CTA’s $500/day late filing penalty you should terminate/kill all inactive entities before January 1, 2025.

How to Terminate an AZ LLC or PLLC: If [. . .]

FinCEN Extends Report Filing Deadline for Entities Formed After 2023

The following is the text of a November 29, 2023, FinCEN news release:

The Financial Crimes Enforcement Network (FinCEN) issued a final rule today that extends the deadline for certain reporting companies to file their initial beneficial ownership information (BOI) reports with FinCEN. Reporting companies created or registered in 2024 will have 90 calendar days from the date of receiving actual or public notice of their creation or registration becoming effective to file their initial reports. FinCEN will not accept BOI reports from reporting companies [. . .]

National Small Business Administration Sues to Overturn the Corporate Transparency Act

National Small Business Administration Press Release, November 20, 2023

Huntsville, AL – Today, Nov. 20, at 10:00 a.m., oral arguments in National Small Business Association v. Yellen will begin at the Huntsville United States District Court. The case is a challenge to the constitutionality of the Corporate Transparency Act (CTA) and specifically the law’s beneficial ownershipreporting requirements. The law would require nearly every American who runs or wants to form a corporation or LLC to [. . .]

What Corporate Transparency Act Means for Small Businesses

The National Small Business Association (NSBA) on November 9, 2023, published a survey it conducted of small businesses regarding the Corporate Transparency Act. The most startling statement in the survey is “The average small-business owner is looking at compliance costs for CTA of nearly $8,000 in the first year alone.”

Here are some of the interesting findings discussed in the survey:

47% of small business owners are unaware of the CTA.
48% said their business [. . .]

What is a FinCEN Identifier & How Can I Use It?

Question: What is a FinCEN Identifier?

Answer: A “FinCEN identifier” is a unique identifying number that FinCEN will issue to an individual or reporting company upon request after the individual or reporting company provides certain information to FinCEN.

An individual or reporting company is not required to obtain a FinCEN identifier.
An individual or reporting company may only receive one FinCEN identifier.
Your company may include FinCEN identifiers in its BOI report instead of certain required information about beneficial owners or company applicants.

Is a Manager of an LLC a Beneficial Owner?

Question: Homer Simpson is a manager of World Wide Widgets, LLC, but he is not a member. Is Homer a beneficial owner of the LLC?

Answer: Yes because as a manager he can make important decisions on the LLC’s behalf, thereby exercising substantial control over it.

Source: Small Business Compliance Guide pages 26

Can a Trustee be a Beneficial Owner?

Question: Can a trustee of a trust that owns an interest in a company be a beneficial owner?

Answer: Yes. A trustee of a trust or similar arrangement may exercise substantial control over a reporting company. The following individuals may hold ownership interests in a reporting company through a trust or similar arrangement:

A trustee or other individual with the authority to dispose of trust assets.
A beneficiary who is the sole permissible recipient of trust income and principal or who has the right to [. . .]

Who is a Beneficial Owner?

If your company is a reporting company, your next step is to identify its beneficial owners. A beneficial owner is any individual who, directly or indirectly:

Exercises substantial control over a reporting company; or
Owns or controls at least 25 percent of the ownership interests of a reporting company.

An individual might be a beneficial owner through substantial control, ownership interests, or both. Reporting companies are not required to report the reason (i.e., substantial control or ownership interests) that an individual is a beneficial [. . .]

Does a Subsidiary of a Report Exempt Entity Have to File a FinCEN Report?

Question: If an entity is exempt from filing a FinCEN Report, is its wholly-owned subsidiary also exempt from filing a FinCEN Report?

Answer: A subsidiary of an entity that is exempt from filing a FinCEN Report is also exempt from filing a FinCEN Report if the subsidiary entity’s ownership interests are controlled or wholly owned, directly or indirectly, by any of these types of exempt entities:

Securities reporting issuer, as defined in Exemption #1;
Governmental authority, as defined in Exemption #21;
Bank, as defined in Exemption #3;
Credit union, as [. . .]

Rick

About Richard Keyt