Corporations and limited liability companies (LLC) who qualify as reporting companies will be required to file a BOIR. This means reporting identifying information about the individuals who own or control a business with the U.S. government. Failure to comply could mean serious civil and criminal penalties.

This new requirement applies to most business entities, known as reporting companies, unless an exception applies.

This rule, under the Corporate Transparency Act, mandates the identification of individuals who benefit from a legal entity.

The goal of this legislation is to provide transparency around business ownership structures. It helps the federal government crack down on financial crimes and fraud, such as money laundering, corruption, human trafficking, drug trafficking, tax fraud, and fraud against employees, customers, and other businesses.

The Corporate Transparency Act is legislation that changes the reporting requirements for beneficial ownership information of business owners operating in the United States. It requires businesses to identify and document any person who holds a 25% or greater ownership interest or exercises substantial control over the company.

Under the new rule, most reporting companies must file information on each beneficial owner with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). FinCEN has developed a database that holds information about each beneficial owner documented by a reporting company.

FinCEN lists 23 types of exempt business entities that do not qualify as reporting companies under the reporting requirement.

• Securities reporting issuer
• Governmental authority
• Bank
• Credit union
• Depository institution holding company
• Money services business
• Broker or dealer in securities
• Securities exchange or clearing agency
• Other Exchange Act registered entity
• Investment company or investment adviser
• Venture capital fund adviser
• Insurance company
• State-licensed insurance producer
• Commodity Exchange Act registered entity
• Accounting firm
• Public utility
• Financial market utility
• Pooled investment vehicle
• Tax-exempt entities
• Entity assisting a tax-exempt entity
• Large operating company
• Subsidiary of certain exempt entities
• Inactive entity

Companies qualify as tax-exempt entities if they meet any of the following criteria:


• The IRS considers them exempt entities under section 501(c) of the Internal Revenue Code (this will include many entities with nonprofit organization status).
• They lost tax-exempt status under the code less than 180 days prior.
• They are political organizations as defined under section 527(a) of the code.
• They are trusts as defined under section 4947(a) of the code.

The agency defines a large operating company as meeting all of the following criteria:


• It is otherwise subject to a federal regulatory regime.
• It has over 20 people with full-time employment status in the U.S.
• It has more than $5 million in gross receipts or sales on a prior year’s tax return filed with the IRS, excluding foreign receipts.
• It has a physical operating presence in the U.S.
• It is owned by an entity already exempt under the Corporate Transparency Act.
• It is otherwise designated as exempt by the Secretary of the Treasury and the U.S. Attorney General.