Indiana Business Law Blog
You may have heard of a new reporting requirement that took effect on January 1, 2024, under the federal Corporate Transparency Act (or CTA). The report is called a Business Ownership Information Report (or BOIR). Most limited liability companies (LLCs), corporations, and other types of business entities are now required file a report with the Financial Crimes Information Center (or FinCEN) disclosing the names of the people who, directly or indirectly, own or control the business entity. A wealth of information regarding the CTA and BOIRs is available at the BOIR home page at https://www.FinCEN.gov/boi; the Small Entity Compliance Guide at https://www.FinCEN.gov/boi/small-entity-compliance-guide; and the list of frequently asked questions at https://www.FinCEN.gov/boi-faqs#A_1. Some basic information is provided below.
What is the purpose of the CTA?
The purpose of the Corporate Transparency Act, passed by Congress in 2021 on a bipartisan basis, is to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures. The BOIR provides law enforcement with information that may not otherwise be readily available to them.
What entities are required to report?
The reporting requirement applies to domestic corporations, LLCs, and other entities that are formed by filing a document with a secretary of state or similar official. It also applies to many foreign entities doing business in the United States.
Are there exemptions?
Yes. Twenty-three, to be specific. The complete list of exemptions is at https://www.FinCEN.gov/boi-faqs#C_2. Some of the most common ones are tax exempt organizations and entities that are subject to reporting requirements of the Securities Exchange Commission (SEC). The latter exception means the requirement applies primarily to small businesses.
What information must be reported?
The amount of information in a BOIR is not extensive. The report includes some basic information about the entity and identifying information about the individuals who own or control the entity.
The individuals who own or control an LLC typically include its members and managers. The individuals who own or control a corporation are typically its shareholders, directors, and officers. However, not every owner must be reported, only those that own or control a certain percentage of the economic or voting interest in the company.
The information includes legal name, address, and a copy of a government-issued identification document with the individual’s photograph, such as a driver’s license or passport. In addition, for entities that are formed in 2024 or later, the report must include the same information about the individual who files the organizational documents with the secretary of state or other official and, in some cases, an individual who instructs that individual to file the document.
Are BOIRs available to the public?
No. BOIRs are stored in a secure, nonpublic database and are available only to authorized government authorities, law enforcement organizations, and financial institutions that are subject to due diligence requirements. They cannot be accessed through a request under the Freedom of Information Act.
Some states allow “anonymous LLCs” to be created without naming the owners. Are they now prohibited?
No. The CTA does not affect the state laws that govern LLCs. There are both legitimate and nefarious reasons the owners of LLCs might not want their identities to be public information. Because the BOIR information is not publicly available, you can still form an LLC without publicly disclosing its owners in the states that permit it. That is good for owners who have legitimate reasons to remain out of the public eye. However, those that have nefarious reasons will find it more difficult to evade law enforcement. https://www.hpindiana.law/business-blog/anonymous-llcs-a-guide-to-understanding-their-benefits-and-drawbacks/
How are reports filed?
BOIRs must be filed online through https://boiefiling.FinCEN.gov/.
When are reports due?
Companies formed before January 1, 2024, must report before January 1, 2025. Those that are formed during 2024 must report within 90 days of formation. Those that are formed later must report within 30 days of formation.
Is this an annual or other periodic requirement?
No, but you must file an update if any information in the report changes. The update is due 30 days after the change.
Need help?
Please contact our office if you wish to have Harshman Ponist’s business attorneys help you determine whether you must file a BOIR, what information must be included, and to file it for you.