Starting on January 1 2024, your company may be required to report information about the people who own or control it to the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN). FinCEN promotes national security and protects the US financial system from fraud and abuse by criminals and corrupt officials.

In 2021, Congress passed the Corporate Transparency Act which creates a new requirement for many companies formed or operating in the US to report their Beneficial Ownership Information (BOI) to FinCEN. This reporting requirement aims to enhance transparency and accountability within corporate structures, contributing to a more secure and transparent financial environment in the United States.

To help you understand what your requirements may be under the new law, we’ve compiled a set of commonly asked questions from resources published through the US Treasury Department to highlight some of the key points of this reporting requirement.

Why do companies have to report Beneficial Ownership Information (BOI)?

Most companies in the US are legitimate businesses, but criminals can use companies to provide cover for money laundering, corruption, tax evasion, drug trafficking, fraud and other crimes, hurting individuals and other small businesses. It is the intention that these reporting requirements will strengthen the US financial system by making it harder for illicit actors to use shell companies to launder their money or hide assets.

Does my company have to report Beneficial Ownership Information (BOI)?

Many corporations, Limited Liability Companies (LLCs), and other entities created in or registered to do business in the United States will likely be required to report their beneficial ownership information to FinCEN.  There are 23 categories of those entities that may be exempt including some types of larger companies, banks, credit unions, tax exempt entities registered with the IRS, and public utilities.

What specific information does my company need to report?

A reporting company will need to furnish various details, including its legal name and any trade name or Doing Business As (DBA), its address, the jurisdiction in which it was formed or first registered (depending on whether it’s a U.S. or foreign company), and its Taxpayer Identification Number (TIN).

For each beneficial owner and each company applicant (if required), a company will need to provide the individual’s legal name, birthdate, address (typically, a home address), and an identifying number from a driver’s license, passport, or another approved document. Additionally, an image of the document containing the identifying number must be supplied.

Who is a beneficial owner of a company?

A beneficial owner is any individual who exercises substantial control over the reporting company or who owns or controls at least 25 percent of it and/or is an important decision-maker for the reporting company. Individuals in the reporting company with substantial control can include a senior officer (the company’s president, chief financial officer, general counsel, chief executive office, chief operating officer, or any other officer who performs a similar function), one who has the authority to appoint or remove certain officers or a majority of directors of the reporting company or is an important decision-maker for the reporting company. Basically, an individual who directs, determines, or has substantial influence over important decisions concerning the reporting company’s business, finances, and structure. Identifying these individuals is crucial for compliance with the reporting requirement.

Who is a company applicant?

Company applicants refer to individuals involved in filing the document that creates or registers the reporting company. Typically, there can be up to two individuals who qualify as company applicants: the individual who directly files the document and the individual primarily responsible for directing or controlling the filing.

Does my company have to report its company applicants?

If your company was created or registered before January 1 2024, you may not need to report company applicants. If your company was created or registered on or after January 1 2024, you may need to report company applicants.

When and how should my company file its initial report?

The timeline for filing your company’s initial report depends on its creation or registration date:

If your company was created or registered before January 1, 2024, you must file by January 1, 2025.

If your company was created or registered on or after January 1, 2024, file within 30 calendar days of receiving actual or public notice from your state’s secretary of state or a similar office that its creation or registration is effective. 

FinCEN will start accepting electronic reports from January 1, 2024 but no earlier. (There are no fees to submit a BOI to FinCEN.) At this time reporting details are being finalized for publication at the FinCEN beneficial ownership information webpage. Learn more at fincen.gov/boi

What if there are changes to or inaccuracies in reported information?

All reporting companies have requirements to update and correct reports as necessary. Companies are required to promptly report any changes or inaccuracies in the reported information. For updates, the 30-day reporting window begins when the change occurs. For corrections, the 30-day window starts when the company becomes aware of or has reason to know about an inaccuracy in a previous report.

As the Beneficial Ownership Information Reporting Rule approaches its implementation date, it’s crucial for companies to understand their obligations and ensure compliance. Detailed guidance and updates can be found on the FinCEN website. In the meantime, if you have any questions please contact us or give us a call at 310-545-7700.

Please note that this article is for informational purposes only and should not be considered legal advice. It is recommended to consult with an attorney for specific legal guidance pertaining to your business and its practices.