Injunction Lifted, Then Reinstated – Beneficial Ownership Information Was Due January 13, 2025, But Now On Hold

(Update as of 12/27/24): In a shocking turn of events, on December 26, 2024, the Fifth Circuit Court of Appeals reversed its own Order issued earlier this week (see below), resulting in a reinstatement of the injunction on filing beneficial ownership information (BOI) reports. This means that as of this blog post, there is no firm deadline on when you need to file your BOI. However, it is important to note that this can change yet again, which may put you at risk of steep penalties. The Fifth Circuit Court of Appeals stated that its reversal was “to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments”. Essentially, the Court stated that there was a significant constitutionality argument that needed to be considered before lifting the injunction to permit FinCEN from mandating compliance with the BOI reporting requirements. Time will tell as to how long this ruling will stay in effect. For the last several weeks, businesses have been waiting with bated breath for a final ruling as to whether or not they are required to file their BOI. Ultimately, businesses can either (i) proactively file their BOI now (if they haven’t already) to avoid any possibility of missing the deadline (which was originally December 31, 2024, then extended to January 13, 2025), or (ii) wait and follow the case closely to see if and when they need to file their BOI. 

(Update as of 12/24/24): On December 23, 2024, the Fifth Circuit Court of Appeals issued an Order Staying the nationwide injunction that was originally entered by the U.S. District Court for the Eastern District of Texas on December 3, 2024. As a result, FinCEN’s beneficial ownership information (BOI) reporting requirements were reinstated. This means that if you are one of the 32 million business owners in the United States, you only have a few days to timely file your BOI without incurring a harsh penalty. This decision has led the Department of the Treasury to extend the filing deadline to January 13, 2025. 

Specifically, the Fifth Circuit Court of Appeals held that the “Government has made a strong showing that it is likely to succeed on the merits in defending CTA’s constitutionality.” Further, the Fifth Circuit Court of Appeals held that “when balancing the harm against the public’s urgent interest in combatting financial crime and protecting our country’s national security, equity favors a stay.” This is in accordance with the long-standing purpose of Congress to determine who owns and financially benefits from business operations conducted within the United States of America.

Who must file a Beneficial Ownership Information Report?

Nearly all businesses in the country are required to file a beneficial ownership information (BOI) report. To help businesses navigate the requirements, FinCEN has published a Small Entity Compliance Guide. This includes limited liability companies (LLCs), professional limited liability companies (PLLCs), corporations, partnerships, domestic companies that were created by the filing of a document with a secretary of state or similar office under applicable state law or Indian tribe, and foreign companies that have also similarly registered to do business in the United States. 

Who is exempt from filing a Beneficial Ownership Information Report?

There are 23 types of entities that are exempt from the reporting requirements, including many nonprofits (but not all), banks, credit unions, securities broker or dealer, money services businesses, insurance companies, accounting firms, and most inactive companies (but not all). 

Where do you file your BOI? 

You can file your company’s BOI online here or visit here for more information. There is no fee for filing your BOI report to FinCEN.

What is the penalty for not timely filing a BOI?

Any willful failure to timely report complete, accurate, truthful, or updated beneficial ownership information to FinCEN, or any attempt to provide false of fraudulent beneficial ownership information may result in civil or criminal penalties, including civil penalties of up to $500 per day per continuing violation, or criminal penalties of imprisonment for up to two (2) years and/or a fine of up to $10,000.00. Senior officers of a non-compliant company will personally suffer the consequences on behalf of the business. 

Who qualifies as a beneficial owner that is required to report? 

The Financial Crimes Enforcement Network (FinCEN) has established clear guidelines for identifying beneficial owners of businesses. Here’s what you need to know about who qualifies and what it means for your company.

Who qualifies as a Beneficial Owner required to report?

If you have substantial control or ownership of 25% or more of the ownership interest in the reporting company, whether directly or indirectly, then you may qualify as a beneficial owner who is required to report your information. Every reporting company must identify at least one beneficial owner. You can have multiple beneficial owners that need to report their interests. Ownership interests can be determined by “any instrument, contract, arrangement, understanding, relationship, or mechanism used to establish ownership.” This means that FinCEN likely considers all verbal agreements (in addition to written) to qualify for such reporting requirements.

A person may exercise substantial control if they:

• Serve as senior officers (e.g. President, CEO, CFO, COO, General Counsel, etc.)
• Can appoint or remove senior officers or board members
• Make significant business decisions (e.g. scope of business operations, finances, or structure)
• Have other forms of substantial or meaningful control over the business

Ownership interest is determined if you directly or indirectly own:

• Equity or stock
• Preorganization certificate or subscription 
• Transferable share or interest related to equity security, joint venture, or business trust
• Voting rights
• Capital/profit interests
• Convertible instruments
• Any rights to purchase, sell, or subscribe to a share or interest in equity, stock, or voting rights or capital or profit interest, even if such warrant or right is a debt 
• Options to acquire ownership

For complex structures, ownership interests can be:

• Direct (personally held)
• Indirect (through other entities)
• Combined (multiple ownership paths)

There are few available exemptions to the reporting requirement, including:

1. Minor children (parent/guardian reports instead)
2. Nominees and intermediaries (like professional advisors)
3. Regular employees (excluding senior officers)
4. Future inheritors (until inheritance received)
5. Creditors (if interest is solely through debt)

Your ownership interest may be calculated differently based on your corporate structure. For corporations, your ownership interest may be determined by the percentage of shares or voting power. For partnerships, your ownership interest may be determined by percentage of capital or profit interests in your company. For more complex structures, you may have to do multiple calculations to determine the amount of your ownership interest. 

How do you ensure future compliance with the BOI reporting requirements? 

As with any new law or legal requirement, it is important to update your policies and procedures to ensure future compliance. Routine and clear documentation of both control and ownership interests will both encourage transparency with all beneficial owners and easily identify the owners who are required to file a BOI report. You can also consult your attorney about indirect ownership through other entities to reduce your exposure. It is also important to maintain accurate ownership records and track all changes that may affect beneficial ownership interests (e.g. acquisition of new shares) or reporting requirements (e.g. minors reaching majority). 

Remember: Companies don’t need to specify whether someone qualifies through control or ownership – just that they meet the criteria. Stay current with reporting requirements to ensure compliance with FinCEN regulations. By understanding these requirements, businesses can accurately identify and report their beneficial owners while maintaining compliance with federal regulations.