BOI FAQs 10/3/24 - Foodman CPAs and Advisors

On 10/3/24, FinCEN published twenty five (25) new updates to the BOI FAQ webpage. The BOI FAQs 10/3/24 address: access to BOI reports, third party service providers, entity conversion, identifications, community property and exemptions. FinCEN’s last update to the BOI FAQ webpage was on 9/10/24. Business owners ought to understand the importance of keeping up with the BOI FAQs 10/3/24 in order to stay compliant with FinCEN Beneficial Ownership Reporting requirements. That said, there is a sense of urgency as it relates to business owners understanding that there is deadline of January 1, 2025, for a reporting company created or registered to do business before January 1, 2024, to file its initial BOI report. Following are the most relevant summarized extracts of the BOI FAQs 10/3/24:

Who can access beneficial ownership information? Federal agencies engaged in national security, intelligence, or law enforcement activity; State, local, and Tribal law enforcement agencies with court authorization; Officials at the Department of the Treasury; Foreign law enforcement agencies, judges, prosecutors, and other authorities that submit a request through a U.S. Federal agency to obtain beneficial ownership information for authorized activities related to national security, intelligence, and law enforcement; Financial institutions with customer due diligence requirements under applicable law (in order to facilitate compliance with those requirements); and Federal functional regulators or other appropriate regulatory agencies that supervise or assess financial institutions with access to beneficial ownership information.
Beneficial ownership information reported to FinCEN is: stored in a secure, non-public database using rigorous information security methods and controls typically used in the Federal government to protect non-classified yet sensitive information systems at the highest security level.
Beneficial ownership information reported to FinCEN is: exempt from disclosure under the Freedom of Information Act (FOIA).
Anyone a reporting company authorizes to act on its behalf—such as an employee, owner, or third-party service provider may: file a BOI report on the reporting company’s behalf. When submitting the BOI report, individual filers should be prepared to provide basic contact information about themselves, including their name and email address. The person filing the BOI report, including a third-party service provider, must certify on behalf of the reporting company that the information is true, correct, and complete.
Reporting companies are created (or, if a foreign company, registered to do business) in the United States by filing a document with a secretary of state or “similar office.” What government offices are “similar offices” to a secretary of state for this purpose? A “similar office” is any office (including a department, agency, or bureau) of a governmental authority under the law of a State or Indian Tribe where or through which a domestic entity files a document to be created or a foreign entity files a document to be registered to do business in the United States. Federal agencies are not “similar offices.” Domestic entities that are created by State or Federal charter are not created by the filing of a document with a secretary of state or similar office.
Does Conversion from one corporate type to another (e.g., LLC to corporation) create a new domestic reporting company that must file an initial beneficial ownership information report with FinCEN? A domestic reporting company is an entity “created by” the filing of a document with a secretary of state or any similar office under the law of a State or Indian Tribe. Depending on the law of the State or Indian Tribe, and the type of entity undergoing a conversion, a conversion filing may result in the creation of a “new” domestic reporting company. Where a conversion does result in the creation of a new domestic reporting company, the new domestic reporting company is required to file an initial beneficial ownership information (BOI) report. Even if a conversion filing does not create a new domestic reporting company, a reporting company that undergoes such a conversion may nonetheless be required to submit an updated BOI report to FinCEN after the conversion.
Does a reporting company need to file a beneficial ownership information report each time it registers to do business in a different state? No.
An individual might be a beneficial owner through: substantial control, ownership interests, or both. A reporting company can have multiple beneficial owners; there is no maximum number of beneficial owners who must be reported.
FinCEN expects that every reporting company will be substantially controlled by: one or more individuals, and therefore that every reporting company will be able to identify and report at least one beneficial owner to FinCEN.
If one spouse has an ownership interest in a reporting company, is the other spouse also considered a beneficial owner if the reporting company is created or registered in a community property state? Possibly. Whether State community property laws affect a beneficial ownership determination will depend upon the specific consequences of applying applicable State law. If, applying community property State law, both spouses own or control at least 25 percent of the ownership interests of a reporting company, then both spouses should be reported to FinCEN as beneficial owners unless an exception applies.
A “non-expired identification document issued by a U.S. State or local government, or Indian Tribe” is: a document issued by such authorities specifically for use as proof of the holder’s identity. Such documents typically, but not always, include a photograph of the holder. This is distinct from personal documents that serve functions other than use as proof of a holder’s identity, such as recording a birth (a “birth certificate”) or granting the holder access to particular government services (e.g., a “library card”).
A U.S. passport card is an acceptable form of identification.
If a reporting company does not have a principal place of business in the United States: then the company must report to FinCEN as its address the primary location in the United States where it conducts business.
If a reporting company has no principal place of business in the United States and conducts business at more than one location within the United States: then the reporting company may report as its primary location the address of any of those locations where the reporting company receives important correspondence.
If a reporting company has no principal place of business in the United States and does not generally conduct business functions at any location in the United States: then its primary location is the address in the United States of the person that the reporting company, under State or other applicable law, has designated to accept service of legal process on its behalf.
Reporting companies that are required to report a beneficial owner or company applicant registered with a State’s Address Confidentiality Program (ACP): should report to FinCEN the ACP address that the State provided to the individual. As a best practice, individuals registered with a State ACP may consider retaining documentation to demonstrate that they participate in an ACP.
For each beneficial owner or company applicant, a company is required to report: the company must provide an identifying number from an acceptable identification document as well as an image of the identification document used to obtain this identifying number. If the name on the identification document of a beneficial owner or company applicant does not match their current full legal name due to a recent legal name change, the individual’s current full legal name should be reported to FinCEN.
If a reporting company’s ownership interests are controlled or wholly owned, directly or indirectly, by more than one exempt entity, do the entities need to be affiliated to qualify for the subsidiary exemption? No. If a reporting company’s ownership interests are controlled or wholly owned by more than one exempt entity, the reporting company may still qualify for the subsidiary exemption if the entities are unaffiliated; however, every controlling or owning entity must itself be an exempt entity in order for the reporting company to qualify for the subsidiary exemption.
Does a subsidiary whose ownership interests are partially controlled by an exempt entity and partially controlled by a non-exempt entity qualify for the subsidiary exemption? No. If an exempt entity controls some but not all of the ownership interests of the subsidiary and any of remaining interests are controlled by a non-exempt entity or by an individual, the subsidiary does not qualify for the subsidiary exemption. To qualify, a subsidiary’s ownership interests must be fully, 100 percent owned or controlled by one or more entities from the list of exempt entities.
Would a reporting company qualify for the pooled investment vehicle (PIV) exemption if it is operated or advised by an exempt reporting adviser (ERA)? The pooled investment vehicle (PIV) exemption from the beneficial ownership information reporting requirements only applies to PIVs operated or advised by certain types of entities. One of these types of entities is an investment adviser registered with the Securities and Exchange Commission (SEC) under the Investment Company Act of 1940 or the Investment Advisers Act of 1940. PIVs operated by ERAs that rely on another exemption from registration with the SEC under the Investment Advisers Act are not thereby exempt from the BOI reporting requirements
Does a reporting company qualify for the large operating company exemption if it is run from a personal residence? It depends. To qualify for the large operating company exemption, an entity must have more than 20 full time employees in the United States, must have filed a Federal income tax or information return in the United States in the previous year demonstrating more than $5,000,000 in gross receipts or sales, and must have an operating presence at a physical office in the United States. The term “operating presence at a physical office within the United States” means that an entity regularly conducts its business at a physical location in the United States that the entity owns or leases and that is physically distinct from the place of business of any other unaffiliated entity. The definition does not preclude residences from being such a physical office. However, the entity that qualifies for the relevant exemption must itself lease (or own) the physical location, regularly conduct business at that location, and the location must be physically distinct from the place of business of any other unaffiliated entity. Thus, if the company is run from a personal residence, the company must itself actually rent or own the space in the personal residence that it uses to qualify for the large operating company exemption.
When a beneficial owner or company applicant has obtained a FinCEN identifier: reporting companies may report the FinCEN identifier of that individual in the place of that individual’s otherwise required personal information on a beneficial ownership information report. An individual who is both a beneficial owner and a company applicant will receive only one FinCEN identifier. A reporting company may report another entity’s FinCEN identifier and full legal name in place of information about its beneficial owners when three conditions are met: (1) the other entity obtains a FinCEN identifier and provides it to the reporting company; (2) the beneficial owners hold interests in the reporting company through ownership interests in the other entity; and (3) the beneficial owners of the reporting company and the other entity are the exact same individuals.
When information for a FinCEN identifier is updated: the BOI reports where that FinCEN identifier appears are automatically updated. When a reporting company provides an individual’s FinCEN identifier for a company applicant or beneficial owner on its BOI report, the Beneficial Ownership IT system automatically links that BOI report to the information provided by the individual when they obtained the identifier, as well as any updates made by the individual to that information.
Are third-party service providers required to maintain records validating that they are authorized to file on behalf of a reporting company? FinCEN does not require third-party service providers to maintain any specific record validating that they are authorized to file on behalf of a reporting company. A third-party filer who willfully files a false or fraudulent beneficial ownership information (BOI) report with FinCEN, however, may be subject to civil and criminal penalties. As a best practice, a third-party filer thus may want to consider maintaining documentary records relevant to BOI reports filed on behalf of reporting companies.

BOI Reporting Companies need to comply with BOI reporting requirements to avoid penalties

The updates to the FinCEN BOI FAQs 10/3/24 are intended to provide further clarity in order to ensure that reporting companies understand and comply with their obligations. As such, the BOI FAQs 10/3/24 are considered to be significant updates.

Do the FinCEN BOI FAQs 10/3/24 provide more clarity regarding your reporting requirements?

Do the FinCEN BOI FAQs 10/3/24 demonstrate that you ought to consider working with a Corporate Governance advisor?