With 2024 comes a new registration requirement with the Financial Crimes Enforcement Network (FinCEN). Beginning January 1, 2024, corporations, limited liability companies and other similar entities created in or registered to do business in the United States must report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).

What is beneficial ownership information (BOI)?

Beneficial ownership information refers to identifying information about the individuals who directly or indirectly own or control a company.

Why do companies have to report BOI to the U.S. Department of the Treasury?

In 2021, Congress passed the Corporate Transparency Act on a bipartisan basis. This law creates a new beneficial ownership information reporting requirement as part of the U.S. government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.

When does a business need to report it’s BOI to FinCEN?

• Business created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial BOI report.
• Business created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report. This 90-calendar day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.
• Business created or registered on or after January 1, 2025, will have 30 calendar days from actual or public notice that the company’s creation or registration is effective to file their initial BOI reports with FinCEN.

How will a business report its BOI?

For businesses required to report BOI to FinCEN, they will do so electronically through a secure filing system available via FinCEN’s website. To complete the registration go to https://www.fincen.gov/boi.

Is a reporting company required to use an attorney or a certified public accountant (CPA) to submit BOI to FinCEN?

No. FinCEN expects that many, if not most, reporting companies will be able to submit their BOI to FinCEN on their own using the guidance FinCEN has issued.

Reporting companies that need help meeting their reporting obligations can consult with professional service providers such as lawyers or accountants.

What happens if a company does not report BOI in the required timeframe?

The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required BOI report may be held accountable for that failure. Additionally, a person may be subject to civil and/or criminal penalties for willfully causing a company not to file a required BOI report or to report incomplete or false beneficial ownership information to FinCEN.

What companies will be required to report beneficial ownership information to FinCEN?

Companies required to report are called reporting companies. There are two types of reporting companies:

• Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
• Foreign reporting companies are 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.

There are 23 types of entities that are exempt from the reporting requirements.

Who is a beneficial owner of a company?

A beneficial owner is any individual who, directly or indirectly exercises substantial control over a reporting company; or owns or controls at least 25 percent of the ownership interests of a reporting company.

An individual might be a beneficial owner through substantial control, ownership interests, or both.

Reporting companies are not required to report the reason (i.e., substantial control or ownership interests) that an individual is a beneficial owner.

A reporting company can have multiple beneficial owners.

An individual exercises substantial control over a reporting company if the individual meets any of four general criteria:

1. the individual is a senior officer;
2. the individual has authority to appoint or remove certain officers or a majority of directors of the reporting company;
3. the individual is an important decision-maker; or
4. the individual has any other form of substantial control over the reporting company. See the chart below for details about these criteria.

Refer to FINCEN BOIR Frequently Asked Questions (https://www.fincen.gov/boi-faqs#C_2) and FINCEN Small Entity Compliance Guide (https://www.fincen.gov/boi/small-entity-compliance-guide) for questions and clarification on BOIR.

If you have any questions, please contact us.