In 2021, the Corporate Transparency Act (CTA) passed through a bipartisan movement to curb illicit financial activity. Although the act is primarily focused on financial fraud through shell companies and anonymous corporate dealings, it affects nearly every business owner. Secretary of the Treasury Janet Yellen said of the new law, “Having a centralized database of beneficial ownership information will eliminate critical vulnerabilities in our financial system and allow us to tackle the scourge of illicit finance enabled by opaque corporate structures.” The Beneficial Ownership Information (BOI) must be reported by the end of 2024, which means many of our fellow paving companies will need to file this information to comply with the law.
Who Must File A BOI Report?
Any company that filed with a Secretary of State office or similar state office as a corporation, LLC, or S Corp may fall into the “domestic reporting company” category under BOI. There are some exemptions, mostly centered around financial and insurance companies. However, one exemption may apply to Pavement Network members who employ more than 20 people full-time.
What Information Is Included?
The report requires the name of the beneficial owner(s) of a company, an address, date of birth, and the number of a valid U.S. identification document like a driver’s license or passport. The company name and address are also included.
Who Will Have Access To My Information?
This information will be shared with national, state, local, and tribal officials for security and law enforcement purposes. It may also be shared with financial entities with the consent of the reporting company and with U.S. financial regulators.
Who Is Exempt From Filing A BOI?
Although there are technically 23 exemptions to filing a BOI report, many of these exemptions are for financial and insurance companies. Non-profit organizations can also fall into an exemption. The exemption most likely relevant to paving and construction companies is Exemption #21 – Large Operating Company. A company must fulfill all six of the following criteria to be exempt from filing a BOI report.
Exemption #21 Requirements
- Employs more than 20 full-time employees (at least 30 hours/week).
- More than 20 full-time employees are employed in the United States.
- The entity has an operating presence at a physical location it owns or leases where it regularly conducts business and is distinct from any unaffiliated entity.
- The entity filed a federal income tax return the previous year with a gross of more than $5,000,000 in sales or receipts.
- This gross amount was reported on IRS Form 1120, 1120-S, or 1065.
- The sales or receipts from sources outside the U.S. are not included in the gross of more than $5,000,000.
If a company meets these six requirements, it is exempt from filing the BOI Report. You can find all 23 exemptions at fincen.gov.
How Do I File the BOI Report?
The report is free to file. Simply go to fincen.gov/boi. This is the Financial Crimes Enforcement Network (FinCEN). FinCEN has prepared a page to walk businesses through the application process. Start with the Prepare Option. Note that although businesses can apply for a unique FinCEN number, you do not need a FinCEN number to fill out and file a BOI report. Once you have determined if you qualify for an exemption and who your beneficial owners are, you can file online using the File Option on the website.
How Do I Determine A Company’s Beneficial Owners?
FinCEN lists an entity’s beneficial owner(s) as 1) a person who owns or controls at least 25% of the ownership interests of a reporting company OR 2) a person who exercises substantial control of a reporting company. A beneficial owner may also do both, owning more than 25% and exercising substantial control. On the BOI report, you must list all beneficial owners who qualify under at least one of these definitions. To help you identify an entity’s beneficial owners, look at FinCEN’s BOI Small Compliance Guide, Chapter Two, “Who Is A Beneficial Owner of My Company?”
Can I Choose Not To File A BOI Report?
Under current law, if your company qualifies as a reporting company, you must file a report by January 1, 2025. Companies that do not file their BOI reports by this time could face civil and criminal penalties. There is a court case challenging BOI reporting (National Small Business United v. Yellen), but this case is currently ongoing, and only specific filers included in this case are exempt from filing. Everyone else should file a BOI report in 2024 to remain compliant with the current Corporate Transparency Act.
What About New Businesses Registered in 2024?
Newly registered businesses have slightly different compliance requirements. They must file BOI reports within 90 days of officially registering for business. In addition, new businesses must include up to two company applicants ‒ individuals who either directly filed for the document to create the business or the individual responsible for the creation of the business, even if they didn’t directly file it. More information on company applicants for businesses created in 2024 can be found in Chapter 3 of the BOI Small Compliance Guide, “Does My Company Have to Report Its Company Applicants?” Again, note that any business created before 2024 does not have to file company applicants.
The Beneficial Ownership Information report is a new requirement affecting many small and medium-sized businesses, and we encourage all Pavement Network members to carefully study whether they are exempt or must file a BOI report by the end of 2024.
Learn more at the Financial Crimes Enforcement Network website and at the U.S. Department of the Treasury.