New rules require beneficial ownership reporting to FinCEN

In 2024, the Corporate Transparency Act (CTA) took effect, requiring over 30 million businesses to either submit a beneficial ownership report to the U.S. Department of Treasury or claim an exemption. The final filing deadline for businesses formed before 2024 is January 1, 2025, unless they qualify for a specific exemption.

As this deadline approaches, it is crucial to determine if your company is subject to these reporting requirements and, if so, to understand the necessary disclosures. These include beneficial ownership details, information about the entity’s creator or registrant in the U.S., and any updates to this data, which must be submitted to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) within a specified timeframe to avoid severe penalties.

New Federal Reporting Requirement for Beneficial Ownership Information (BOI)

Effective January 1, 2024, many companies in the United States must report information about their beneficial owners—the individuals who ultimately own or control the company—to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.

Filing is simple, secure, and free of charge. Beneficial ownership information reporting is not an annual  requirement. Unless a company needs to update or correct information, a report only needs to be submitted once.

Be sure to review FinCEN’s Small Entity Compliance Guide, which provides information to help small businesses comply with this reporting requirement.

Who Has to Report?

Companies required to report are called reporting companies. Reporting companies may have to obtain information from their beneficial owners and report that information to FinCEN.

Your company may need to report information about its beneficial owners if it is:

1. a corporation, a limited liability company (LLC), or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe; or
2. a foreign company and was registered to do business in any S. state or Indian tribe by such a filing.

Who Does Not Have to Report?

Twenty-three types of entities are exempt from beneficial ownership information reporting requirements, including publicly traded companies, nonprofits, and certain large operating companies.

FinCEN’s Small Entity Compliance Guide includes checklists for each of the 23 exemptions that may help determine whether your company qualifies for an exemption. Please review Chapter 1.2 of the Guide for more information.

How Do I Report?

Reporting companies report beneficial ownership information electronically through FinCEN’s website: www.fincen.gov/boi. The system provides a confirmation of receipt once a completed report is filed with FinCEN.

When Do I Report?

FinCEN began accepting reports on January 1, 2024.

• If your company was created or registered prior to January 1, 2024, you will have until January 1, 2025 to report BOI.
• If your company is created or registered in 2024, you must report BOI within 90 calendar days after receiving actual or public notice that your company’s creation or registration is effective, whichever is earlier.
• If your company is created or registered on or after January 1, 2025, you must file BOI within 30 calendar days after receiving actual or public notice that its creation or registration is effective.
• Any updates or corrections to beneficial ownership information that you previously filed with FinCEN must be submitted within 30 days.

Source:  https://fincen.gov/sites/default/files/shared/BOI-Informational-Brochure-April-2024.pdf

 The Why

Congress passed the Corporate Transparency Act in 2021 in a bipartisan attempt to thwart bad actors attempting to benefit from dishonest means, such as through shell companies or other murky ownership frameworks.

Secretary of the Treasury Janet Yellen said the act “. . . marks a historic step forward to protect our economic and national security” and that the centralized database of beneficial ownership information would help stamp out perilous vulnerabilities in the financial system.

The Who

FinCEN created two categories of companies required to report, known as reporting companies:

1. Domestic reporting companies: corporations, limited liability companies (LLC), and any others “created by the filing of a document with a secretary of state or any similar office in the United States.”

1. Foreign reporting companies: Entities (including corporations and limited liability companies) “formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.”