BOI compliance for shifting ownership structures

The Beneficial Ownership Information (BOI) reporting rule requires certain entities, known as reporting companies, to submit BOI reports to FinCEN. Reporting companies are generally those created by filing a document with a Secretary of State or similar office, or foreign entities registered to do business in the U.S.

Beneficial owners include individuals who directly or indirectly own 25% or more of the ownership interests, or any individual exercising substantial control over the company. Company applicants (those who filed formation documents) must also be reported.

For each, companies must collect and report their name, date of birth, address, and a unique identifying number along with an image of the ID. Updated BOI reports are triggered by various changes.

These include any change to the reporting company's previously reported information (e.g., business name), any change in beneficial owners (e.g., a new CEO, or a sale altering the 25% ownership threshold), or any change to a beneficial owner's name, address, or identifying document.

If a beneficial owner obtains a new identifying document with changed information, an updated report including an image of the new document is required. Updated BOI reports must be filed within 30 days of learning of a change that affects reported information.

Failure to meet this deadline can result in significant penalties, including daily financial penalties of $591 per day for each day the violation continues, and potential criminal penalties for willful violations.

Typical ownership-change scenarios requiring action include: Transfer of LLC membership interests: If a sale or transfer causes a person to newly meet or fall below the 25% ownership threshold, or alters who exercises substantial control, an updated BOI report is necessary.

Mergers, acquisitions, asset sales: Transactions that change who qualifies as a beneficial owner or who exercises substantial control necessitate an updated report. Estate or succession transfers: If ownership shifts to a new individual who meets the reportable criteria, the BOI report must be updated.

FinCEN provides multiple exemptions for certain entities, such as large operating companies, SEC-reporting issuers, banks, and government entities. Companies should verify if they qualify for an exemption.

To ensure compliance, businesses should: Establish a documented internal process to identify reportable events like changes in cap tables, membership transfers, managerial changes, or merger closings. Incorporate notification and representation clauses in purchase/sale agreements and operating agreement amendments to ensure prompt alerts regarding ownership or control changes.

Collect and verify required identity documentation (ID image, ID number) for any new beneficial owner or company applicant. File the updated BOI report with FinCEN within the 30-day timeframe and retain confirmations and records.

Understand that BOI filing is a federal requirement to FinCEN, separate from state-specific filings. Seek legal counsel for complex situations involving multi-tier ownership, trusts, nominee arrangements, or foreign owners to determine indirect ownership attribution and update triggers.

The Beneficial Ownership Information (BOI) reporting rule requires certain entities, known as reporting companies, to submit BOI reports to FinCEN. Reporting companies are generally those created by filing a document with a Secretary of State or similar office, or foreign entities registered to do business in the U.S.

Beneficial owners include individuals who directly or indirectly own 25% or more of the ownership interests, or any individual exercising substantial control over the company. Company applicants (those who filed formation documents) must also be reported.

For each, companies must collect and report their name, date of birth, address, and a unique identifying number along with an image of the ID. Updated BOI reports are triggered by various changes.

These include any change to the reporting company's previously reported information (e.g., business name), any change in beneficial owners (e.g., a new CEO, or a sale altering the 25% ownership threshold), or any change to a beneficial owner's name, address, or identifying document.

If a beneficial owner obtains a new identifying document with changed information, an updated report including an image of the new document is required. Updated BOI reports must be filed within 30 days of learning of a change that affects reported information.

Failure to meet this deadline can result in significant penalties, including daily financial penalties of $591 per day for each day the violation continues, and potential criminal penalties for willful violations.

Typical ownership-change scenarios requiring action include: Transfer of LLC membership interests: If a sale or transfer causes a person to newly meet or fall below the 25% ownership threshold, or alters who exercises substantial control, an updated BOI report is necessary.

Mergers, acquisitions, asset sales: Transactions that change who qualifies as a beneficial owner or who exercises substantial control necessitate an updated report. Estate or succession transfers: If ownership shifts to a new individual who meets the reportable criteria, the BOI report must be updated.

FinCEN provides multiple exemptions for certain entities, such as large operating companies, SEC-reporting issuers, banks, and government entities. Companies should verify if they qualify for an exemption.

To ensure compliance, businesses should: Establish a documented internal process to identify reportable events like changes in cap tables, membership transfers, managerial changes, or merger closings. Incorporate notification and representation clauses in purchase/sale agreements and operating agreement amendments to ensure prompt alerts regarding ownership or control changes.

Collect and verify required identity documentation (ID image, ID number) for any new beneficial owner or company applicant. File the updated BOI report with FinCEN within the 30-day timeframe and retain confirmations and records.

Understand that BOI filing is a federal requirement to FinCEN, separate from state-specific filings. Seek legal counsel for complex situations involving multi-tier ownership, trusts, nominee arrangements, or foreign owners to determine indirect ownership attribution and update triggers.