When Do Beneficial Ownership Information Reports Need to Be Updated in California?

 Posted on March 06, 2024 in Employment Taxes

Businesses must meet a variety of legal requirements as they establish organizational structures, pay taxes, and file reports with government organizations. One recent change to the law has put new requirements in place in which certain types of businesses must report information about beneficial ownership to the Financial Crimes Enforcement Network (FinCEN). In addition to understanding when these reports need to be filed initially, business owners and corporate officers will also need to understand when updates will need to be made. To avoid potential penalties and ensure that legal concerns will be handled correctly, small businesses, large corporations, and other types of organizations can work with an attorney who has experience in these matters.

Understanding Beneficial Ownership Information Reports

Beneficial Ownership Information Reports (BOIRs) identify the individuals who ultimately own, control, or benefit from a company. They provide identifying information about a company, including its primary name, trade names, address, and taxpayer identification number. Identifying information about stakeholders who have a significant ownership stake in a company or who exercise control over the business must also be reported. These reports play a pivotal role in preventing financial fraud, money laundering, and other illicit activities. They can help ensure that businesses will operate transparently and meet their tax obligations and other legal requirements.

When to Update a BOIR

Updating a Beneficial Ownership Information Report is a necessary step triggered by specific events. Here are key scenarios when an amendment is required:

Changes in Ownership or Control

• New owners or officers: If there are any changes regarding the individuals who own or control a significant percentage of the company, an update is mandatory. These may include the hiring of a new CEO or other officers who will have control over the direction of the business.

• Alterations in shareholding: Significant changes in the distribution of shares or voting rights that affect control or ownership must be reported as long as they meet the 25% ownership interest threshold.

• Structural reorganizations: If the company undergoes a merger, acquisition, or any restructuring that alters beneficial ownership, an updated report is required.

Changes in Identifying Information

• Changes to company information: Any updates to information reported about a company, such as a new business name or address, must be reported.

• Updated personal details: Changes in the personal information of existing beneficial owners, such as address or contact details, require report amendments.

• Change in status: If a beneficial owner's status changes in a way that affects their control or ownership of the company, this needs to be reflected in the BOI report.

Timelines for Filing Updated Reports

It is important to ensure that updated BOIRs are filed within the correct timeframes. Some general guidelines for updating beneficial ownership information within the appropriate timeframes include:

• Immediate reporting: Ideally, any change in beneficial ownership should be reported as soon as possible. A business will have 30 days to file an updated  BOIR after applicable changes occur. Failure to file an updated report within this 30-day window may result in penalties.

• Annual reviews: Even in the absence of changes, it is prudent for companies to review their BOIRs annually to ensure continued compliance and accuracy. If any reasons for updating beneficial ownership information are uncovered, an updated report should be filed as soon as possible.

Contact a San Jose, CA Business Tax Attorney

Beneficial Ownership Information Reports play a key role in corporate transparency and tax-related issues that can affect businesses. If you are unsure about your reporting requirements, or if you are concerned about potential penalties that may apply for failure to file or update a BOIR, John D. Teter Law Offices can advise you of your legal options. Our San Jose small business tax lawyer can help you meet your legal requirements, and we can help you avoid the civil or criminal penalties that may apply in these situations. To learn how we can help you navigate the landscape of business compliance and tax-related issues, contact us at 408-866-1810 and set up a consultation.