At the moment, the requirements to report persons that either, owns at least 25% of a company or a similar level of control over the company’s equity, or has substantial control over that company are suspended.
However, Cerrud Law, P.A. recommends that you, notwithstanding the stay, you comply with the voluntary filing of the Beneficial Ownership Information Report. For further questions please contact us by visiting www.CerrudLaw.com.
What is the Beneficial Ownership Information Report?
The Beneficial Ownership Information Report (“BOIR”) is a disclosure of beneficial ownership in companies the United States that is filed with the Financial Crimes Enforcement Network (“FinCEN”). The BOIR is a requirement under the Corporate Transparency Act (“CTA”) created in 2021, which went into effect January 1, 2024.
The BOIR requires reporting companies to file reports with FinCEN that identify two categories of individuals: (1) the beneficial owners of the entity; and (2) the company applicants of the entity.
Which Companies Must Report?
There are two (2) types of reporting companies: domestic and foreign.
Domestic Companies
A domestic reporting company is a corporation, limited liability company (LLC), or any entity created by the filing of a document with a secretary of state or territory of the United States, or any similar office under the law of a state or Indian tribe.
Foreign Companies
A foreign reporting company is a corporation, LLC, or other entity formed under the law of a foreign country that is registered to do business in any state or territory of the United States or tribal jurisdiction by the filing of a document with a secretary of state or any similar office.
Exempt Companies
Under the BOIR, pursuant to the CTA, twenty-three (23) types of entities are exempt from the definition of a reporting company.
Who are Beneficial Owners?
Under the BOIR, a beneficial owner includes any individual who, directly or indirectly, either (1) exercises substantial control over a reporting company, or (2) owns or controls at least 25 percent of the ownership interests of a reporting company.
Substantial Control
Substantial control, for purposes of establishing a beneficial owner reporting requirement, basically means anyone who is able to make important decisions on behalf of the entity.
Ownership Interest
Any persons that either, owns at least 25% of a company or a similar level of control over the company’s equity must be reported as beneficial owners.
Who Files the BOIR?
Company applicants file the BOIR. Only two (2) persons can be company applicants; (1) the individual who directly files the document that creates the entity, or in the case of a foreign reporting company, the document that first registers the entity to do business in the United States and (2) the individual who is primarily responsible for directing or controlling the filing of the relevant document by another.
Timing Requirements of Reports
Reporting companies created or registered before January 1, 2024 were to have one (1) year (until January 1, 2025) to file their initial reports, while reporting companies created or registered after January 1, 2024, were to have thirty (30) days after receiving notice of their creation or registration to file their initial reports.
Thereafter, reporting companies have thirty (30) days to report changes to the information in their previously filed reports and must correct inaccurate information in previously filed reports within thirty (30) days of when the reporting company becomes aware or has reason to know of the inaccuracy of information in earlier reports.
However, please note that, there have been extensions and suspensions; as of the date of this narrative, the CTA and BOIR is suspended pending litigation in the United States Supreme Court.
Ongoing Litigation (Suspended, Re-established, and Suspended Again)
On December 3, 2024, U.S. District Court for the Eastern District of Texas suspended the CTA and the BOIR requirements as unconstitutional.
On December 17, 2024, on appeal, the U.S. District Court for the Eastern District of Texas rule that the suspension of the CTA and the BOIR requirements were properly administered.
On December 23, 2024, the Fifth Circuit Court of Appeals reinstated the CTA and the BOIR requirements. Dure to this Ruling, the deadline for reporting companies created before January 1, 2024, was extended from January 1, 2025 to January 13, 2025.
On December 26, 2024, the Fifth Circuit Court of Appeals suspended the CTA and the BOIR requirements.
On December 31, 2024, the Department of Justice (“DOJ”) requested that the Supreme Court lift the nationwide suspension in the BOIR while the litigation continues.
The Supreme Court is to hear oral arguments March 25, 2025 and determine the constitutionality of the CTA.
*Updated as of January 5, 2025