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October 30, 2024

The new Beneficial Ownership Information Reporting (BOIR) from FinCEN (Financial Crimes Enforcement Network) requires many companies to report information about the company itself, its applicant (for companies registered in 2024 onwards), and its beneficial owners- the individuals who owns or controls the business.  

Sole proprietors or single-member LLCs are automatically identified as their company’s beneficial owners, as they fully own and control their business. However, multi-member companies or corporations must investigate to identify the specific individuals that qualify as beneficial owners of the company.  

If you are an investor, you might be wondering whether you will also face the need to provide your information for a BOIR.  

Who is a Beneficial Owner? 

The beneficial owner(s) of a company is any individual who directly or indirectly: 

  • exercises substantial control over a reporting company, or 
  • owns at least 25% of the reporting company. 

Know that beneficial owners must be individuals, therefore trusts, corporations, or other legal entities cannot be reported beneficial owners. If a legal entity is identified to be a beneficial owner of a reporting company, the legal entity must identify its own beneficial owners using the above criteria and shall be reported as the reporting company’s beneficial owners. 

What is Substantial Control? 

The 25% ownership requirement to be a beneficial owner of a company is self-explanatory. But how do we know if an individual has substantial control? According to FinCEN, an individual is considered to be exercising substantial control over a reporting company if he or she is any of the following: 

  • a senior officer – President, Chief Financial Officer (CFO), Chief Executive Officer (CEO), Chief Operations Officer (COO), or any other officer with similar functions.  
  • an individual who has an authority to remove a senior officer or a majority of board members or similar bodies 
  • an important decision-maker for the company, or 
  • an individual who has any other form of substantial control over the company. 

Note that a member of the board of directors is not an automatic beneficial owner unless they own at least 25% of the company or exercise substantial control over the company. 

What are the Required Information from a Beneficial Owner? 

A reporting company must report the following information of their beneficial owner(s). 

  1. Name of the beneficial owner 
  1. Date of birth 
  1. Residential address 
  1. The issuing state and the identifying number of a valid identification document such as a U.S. driver’s license or a passport. 
  1. A photo or image of the identifying document used for item no. 4. 

It is the responsibility of the reporting company to ensure that they submit a complete and accurate beneficial ownership information to FinCEN. However, the individuals required to be reported by a reporting company must also cooperate with them or they may face penalties if the intentionally cause a reporting company to fail to report an accurate BOI report. 

Want to learn more? 

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Contact us toll-free (855)529-1099 or make an appointment for a free consultation. Contact Us

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