Is Your Manufacturing Company Subject to the New Beneficial Ownership Information Reporting?

As of January 1, 2024, as part of the Corporate Transparency Act of 2024, many businesses must report Beneficiary Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN), a bureau of the United States (U.S.) Department of the Treasury. This new filing identifies and reports information about the individuals who directly or indirectly own and control the business. This requirement aims to fight tax evasion, fraud, money laundering and other unethical and illegal financial practices. Companies formed before January 1, 2024, have until January 1, 2025, to submit their initial BOI report, while those formed on or after January 1, 2024, and before January 1, 2025, must file within 90 calendar days after receiving notice of the company’s registration.

Does My Company Need To Complete This New Filing?

Companies required to file are called “reporting companies.” This includes C corporations, S corporations, limited liability companies (LLCs), single-member LLCs, and, in some cases, nonprofits and trusts. Essentially, any entity formed in the U.S. by filing documents with a secretary of state or any similar office under the law of a state. There are two types of reporting companies: domestic reporting companies, created within the U.S., and foreign reporting companies, formed under foreign law but registered to do business in the U.S.

However, 23 types of entities are exempt from the BOI reporting, most of which are already regulated and, therefore, already provide beneficial owners information in other documents. Examples include banks, credit unions, insurance companies, accounting firms and large operating companies (defined as having more than 20 employees, a physical office in the U.S. and more than $5 million in gross receipts in the previous year). As a result, the reporting requirements primarily impact smaller businesses.

Who Is Included in This Filing and What Information Am I Giving?

Beneficial ownership information refers to identifying information about the individuals – the beneficial owners – who directly or indirectly own or control a company. A beneficial owner is someone who either exercises substantial control over the company or owns (or controls) at least 25% of the ownership interests. An individual can exercise substantial control over a reporting company in four different ways. If an individual falls into one of the following categories, the individual is considered to be exercising substantial control:

1. 1. Senior Officer: Key roles like president, chief financial officer, general counsel, chief executive officer, chief operating officer or any other officer who performs a similar function.
   2. Authority To Appoint or Remove: Individuals with the authority to appoint or remove certain officers or a majority of directors.
   3. Important Decision-Maker: Those authorized to make important decisions for and on behalf of the company.
   4. Other Form of Substantial Control: A catch-all for other significant forms of control.

Information about the reporting company, as well as the beneficial owners, is included in the filing. Reporting companies must provide basic information, including their legal name, trade names, current street address, jurisdiction of formation and taxpayer identification number. However, the focus of the filing is on the beneficial owner’s information, which includes details such as name, date of birth, residential address, identifying numbers and jurisdiction from a driver’s license or passport, as well as images of identification documents.

How Do I Complete the Filing?

Reporting companies must submit their beneficial ownership information electronically through the FinCEN’s website. To access the form, visit https://boiefiling.fincen.gov/ and select “File BOIR.” The system will provide a confirmation of receipt once a completed report is filed with FinCEN. While reporting companies must file BOI reports on their own, CPAs can offer guidance in determining reporting obligations.

Contributing author: Abby K. Sweers, CPA, serves as a tax manager at the firm. Abby brings expertise in preparing and reviewing various individual and corporate tax engagements, including tax planning and compliance. She specializes in the manufacturing and construction industries, multi-state entities and high-net-worth individuals. For more information on this topic, contact Abby at asweers@dmcpas.com.