Effective January 1, 2024, under the Corporate Transparency Act, many companies are now required to report information to the Financial Crimes Enforcement Network of the U.S. Treasury (“FinCEN”)about the individuals who ultimately own or control them. More information about this filing requirement can be found at: https://www.fincen.gov/boi.
The new law applies to U.S. entities that are created by submitting a filing with the secretary of state’s office of any state. This includes corporations, limited liability companies (LLCs), and certain partnerships. Foreign entities also may need to report if they are registered to do business in the U.S.
Entities that were in existence prior to January 1, 2024, are required to file no later than January 1, 2025. Entities formed between January 1 and December 31, 2024, are required to file no later than 90 calendar days after receiving actual or public notice that their company’s creation or registration is effective. Beginning in 2025, newly formed entities will have 30 days to file. After submitting the initial report, reporting companies are required to amend their reports within 30 days after any submitted information changes or if an error is discovered.
For each “beneficial owner” (defined below), reporting companies must submit the following information in a beneficial ownership information (“BOI”) report through the FinCEN online portal (https://boiefiling.fincen.gov/) : (1) full legal name and birthdate, (2) complete address, and (3) photograph of a passport or driver’s license. For entities formed on or after January 1, 2024, the same information must also be reported for any “company applicant,” defined as the individual who directly files, or is primarily responsible for directing or controlling the filing of, the document that creates the reporting company. The BOI report must also include the following information about the reporting company: (1) its legal name, (2) any trade names or DBAs, (3) the current street address of its principal place of business, (4) its jurisdiction of formation, and (5) its Taxpayer Identification Number.
A “beneficial owner” is defined as anyone who either owns at least 25% of the ownership interests of the reporting company, or exercises substantial control over the reporting company. While there are detailed rules about what constitutes an ownership interest or substantial control of a reporting company, the rules generally favor over-reporting when in doubt.
This is a new reporting regime with very little and ever-changing guidance, however most small and closely held companies are subject to the filing requirement. While burdensome, it is important not to overlook this new law. Willful failure to report or update information can result in significant fines of up to $591 per day until the violation is remedied, or if criminal charges are brought, fines of up to $10,000 and/or two years imprisonment.
Please contact our office if you have any questions about complying with this new law.
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