Whipsaw BOI Rulings Leave Business Owners Dizzy

On Dec. 26, a merits panel of Fifth Circuit Court of Appeals nullified the earlier motions panel’s ruling and reinstated the original injunction. The action was designed to prevent business owners from becoming subject to reporting obligations viewed as burdensome until the court had fully considered the merits of the parties’ arguments.

While the order gave little information, the Fifth Circuit’s ruling did state that the Department of Justice’s appeal remains on an expedited track. Oral arguments are scheduled for March 25.

BOI Reporting Requirements: Background

If the injunction is eventually lifted, beneficial ownership information reporting obligations would apply to nearly all domestic reporting companies. Reporting companies include corporations, LLCs, limited partnerships and any other entity formed by filing a document with a secretary of state in the United States. Reporting companies must identify and provide information about beneficial owners to FinCEN.

“Beneficial owners” include natural people who either 1) exercise substantial control over the company or 2) own or control 25% or more of the ownership interests in the company, whether directly or indirectly. When making the determination of whether an individual owns or controls 25% of the business, the individual’s options, convertible instruments and other similar equity rights are treated as though they have been exercised.

For each beneficial owner, the company must provide (1) full legal name, (2) date of birth, (3) address, (4) identifying number from the individual’s ID (driver’s license or passport) and (5) a copy of the ID used. The reporting company itself must report the entity’s (1) legal name, (2) any trade names or dba names, (3) principal place of business, (4) state of formation and (5) unique taxpayer ID number.

Absent the stay, entities created before Jan. 1, 2024, were required to file their BOI reports before Jan. 1, 2025. Entities created after Jan. 1, 2024, had 90 days from the date their registration became effective to report the required information.

Starting in 2025, new entities were to have only 30 days from the date of creation to complete the reporting form. The 30-day clock would begin to run on the date the entity gains actual knowledge that its registration is effective, or the date when registration is published publicly.