The federal Corporate Transparency Act was passed in 2021 to curb money laundering, terrorist financing, and other corrupt financial activities. One key provision is the creation of a national registry of who owns and controls companies. This information will make it harder for criminals to commit fraud through the U.S. financial system.
Final rules went into effect January 1, 2024. The U.S Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) bureau has built a system for the information to be provided by the more than 30 million businesses expected to report. All companies that meet specific criteria must file beneficial ownership information (BOI) and other company information within a certain time period, depending on when the company was formed. Required information includes:
- Details about the entity
- Information about the entity’s beneficial owners
- For companies formed on or after January 1, 2024, information about the people who filed the document that first created or registered the business.
Which Companies Must File a Report?
Companies required to file this information include corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States. Entities not required to be filed with a secretary of state or similar office do not need to file a BOI report. Such non-filing entities include common law trusts, general partnerships, and sole proprietorships.
Are There Exemptions?
Yes, there are 23 exemptions, a few of which may apply to real estate businesses. Such exemptions include publicly traded companies, large operating companies, and wholly owned subsidiaries of those exempt entities. The large-operating-company exemption applies to an entity that has a physical office in the U.S., more than 20 full-time employees, and more than $5 million in gross receipts or sales on its last federal tax return. The term full-time employee applies only to W-2 employees of the business. It does not include part-time employees, leased employees, or independent contractors. A person is not considered an employee if the person also has ownership interest in the entity.
Want more information?
Access guidance documents and FAQs at fincen.gov/boi
Ready to file? Companies that must file a BOI report can prepare the documents with an offline PDF and upload the completed report or use FinCEN’s online system to file. Find both at boiefiling.fincen.gov/fileboir.
Note: A federal judge in Alabama has ruled against the Treasury Department, barring the department from requiring some small businesses from reporting personal details about their owners. The ruling does not impact business owners nationwide, though. Texas REALTORS® will continue to monitor this case and provide updates as necessary.
What Details About the Entity Must Be Filed?
Companies must provide:
- Full legal name
- Any trade or “doing business as” (d/b/a) name
- Street address of principal place of business or primary location in U.S.
- Jurisdiction of formation or registration
- The company’s IRS Taxpayer Identification Number (TIN), including an Employer Identification Number (EIN).
Along with this company information, information must be reported about the company’s beneficial owner(s).
Who is a Beneficial Owner?
The act defines beneficial owner as owners and individuals who control a company or who own or control at least 25% of the company’s ownership interests. A company can have many beneficial owners. FinCEN considers an individual as someone who controls a company if any of the following criteria are met:
- Service as a senior officer or general counsel
- Authority over appointment or removal of any senior officer or dominant majority of the board of directors
- Direction, determination, decision-making functions, or substantial influence over important matters of a company.
The act requires each beneficial owner to file the following information:
- Full legal name of the individual
- Date of birth
- Current residential street address
- A unique identifying number, such as from a current U.S. passport, foreign passport, state or local ID, or driver’s license
- An image of the document from which the unique identifying number came that includes a photograph of the individual.
Information May also be Required for Company Applicants
Companies created on or after January 1, 2024 that are not exempt must also report at least one individual as the company applicant. No more than two company applicants can be reported. The individual who directly filed the document that first created or registered the business is considered a company applicant. An individual who directs or controls the filing of such document by another person also is a company applicant. Company applicants must report the same information required of beneficial owners.
Deadlines for Reporting Companies
| When the entity was formed | Filing Deadline |
|---|---|
| Filing Deadline | January 1, 2025 |
| On or after January 1, 2024 through December 31, 2024 | 90 calendar days after formation |
| On or after January 1, 2025 | 30 calendar days after formation |
Updates or corrections to reported information must be filed within 30 calendar days after any change in reporting information or from the time the reporting company becomes aware of inaccuracy.
Penalties can be Significant
The penalties for failure to report or providing false or fraudulent information includes fines of $500 per day up to a maximum of $10,000 and up to two years in prison.