December 26, 2024 UPDATE: On December 26rd, a merits panel on the Fifth Circuit Court of Appeals stayed the ruling that vacated the nationwide injunction against beneficial ownership information (BOI) reporting requirement. As such, the injunction against BOI reporting requirements is back in effect, meaning that BOI reporting is voluntary until further developments occur.
On several other prior occasions, authors of this extension portal have written about FinCEN's latest requirements for BOI reports. Readers of this article are highly encouraged to check out broader explanation of these topics in those articles at this link and this link. Readers who are curious about the definition of a beneficial owner are encouraged to read an article specifically about that topic at this link.
On several occasions, the question has arisen that an individual has to meet reporting requirements on an inactive business entity that, if active, would be required to file beneficial ownership information (BOI) reports with the Financial Crimes Enforcement Network (FinCEN) under the Corporate Transparency Act (CTA).
The answer depends on several criteria set forth on page 14 of the Small Entity Compliance Guide, created by FinCEN to aid in questions like this. According to FinCEN, if the inactive entity meets all of the following criteria, the entity is exempt from BOI reporting requirements:- The entity was in existence on or before January 1, 2020 (e.g., paying registration fees to the state secretary of state).
- In other words, if the entity was in existence after January 1, 2020, the entity will need to file a BOI report to remain in compliance.
- The entity is not engaged in active business.
- The entity is not owned by a 'foreign person,' whether directly or indirectly, in whole or in part. Foreign person is defined as someone who is not a 'United States person,' which is defined in Section 7701(a)(30) of IRS Code as a U.S. citizen, U.S. resident, U.S. corporation, U.S. partnership, U.S. trust, or U.S. estate.
- The entity has not experienced any change in ownership over the preceding 12-month period.
- The entity has not sent or received funds in an amount greater than $1,000, either directly or through any financial account in which the entity or any affiliate of the entity had an interest, in the preceding 12-month period.
- The entity does not otherwise hold any kind or type of assets, whether in the U.S. or abroad, including any ownership interest in any corporation, limited liability company, or other similar entity.
