As a business owner who is always alert to business compliance news, we are sure you have heard already about the new mandate, the Beneficial Owner Information Report (BOI or BOIR), which all LLC owners (and other entities) must file with the Federal government. This mandate effectively started this year (January 1st, 2024) with the habilitation of the website FinCEN.gov/ BOI.
You can read our past blogs describing the BOI Report and the Corporate Transparency Act here.
What is the BOI Report?
In essence, the Corporate Transparency Act mandates that all LLCs and other entities report their beneficial owners to an agency called FinCEN (Financial Crimes Enforcement Network). The reporting aims to create a more transparent business environment and reduce crimes such as money laundering, combat terrorism, organized crime, etc.
Who is a Beneficial Owner?
A Beneficial owner is the person or persons who ultimately benefit from the business and/or exercise at least 25 percent of decision-making power over the entity. Let’s have the example of a restaurant. The beneficial owners is not only the owner but the manager of the restaurant if he or she exercises at least 25% control of the business decisions.
Also, the beneficial owner is a live person, not an entity. The report seeks to find all living persons behind the businesses that operate LLCs in the USA.
FinCEN Answers to Questions About BOI
The original guidance to report BOI published by the government raised some questions among business owners, lawyers, and accountants, and many sought clarifications from the Federal Government on some of the specific details.
A few days ago, The Financial Crimes Enforcement Network (FinCEN) published updates to its list of Frequently Asked Questions (“FAQs”) to clarify how to comply with BOI in the case of a business dissolution and respond to the public’s inquiries.
The main question is, Do LLCs that no longer exist or are planned to be terminated in 2024 need to file a BOI?
And the answer is YES.
Companies created before or during 2024 and dissolved in 2024 must file a BOI Report.
Companies are not required to report beneficial ownership information to FinCEN if they are exempt or ceased to exist (formally terminated with the Secretary of State or similar agency, such as the Arizona Corporate Commission in Arizona) as legal entities before January 1, 2024.
So, business owners are advised to file the BOI Report before dissolving an entity.
Moreover, “businesses that are administratively dissolved or suspended (e.g., for failure to pay a filing fee or comply with certain requirements), in general, do not cease to exist as a legal entity unless the dissolution or suspension becomes permanent. Until dissolution or suspension becomes permanent, these entities must file BOI reports to avoid potential penalties”.
In the past, we advised our clients to dissolve any LLC that was not used as a corporate hygiene practice. With the recent clarification, we are urging the public to file a BOI Report in addition to the dissolution filing in 2024.
Indian Tribes and the Report
The July 8 updated FAQs also clarified specific scenarios with companies, such as Indian Tribes fully or partially owning the LLCs. Please read the government response to Indian Tribes ownership and BOI with the FAQs section here.
Please follow our blog and/or access FinCEN’s updated FAQs for future clarifications and updates.
Marcos Law
Attorney Marcos E. Garciaacosta is a business and intellectual property attorney who practices in the Phoenix metro area and internationally.
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