Article Written By Kelly Del Ponte

Beginning on January 1, 2024, many companies in the United States will need to report beneficial owner information (BOI) to the Financial Crimes Enforcement Network (FinCen), a bureau of the U.S. Department of the Treasury. In 2021, Congress enacted the Corporate Transparency Act (the Act), which created reporting requirement for the purpose of detecting, preventing and punishing terrorism, money laundering and other misconduct through opaque ownership structures.  A “beneficial owner” as an individual who, directly or indirectly, exercises substantial control over the entity or owns or controls at least 25 percent of the ownership interests of the entity.

Who must Report? Companies required to report are fittingly called “reporting companies.” The Act broadly defines reporting companies, encompassing both domestic and foreign companies. Domestic reporting companies include corporations, LLCs, or other similar entities that are created by filing a document with a secretary of state or similar office under State or Tribal law. However, the Act exempts 23 types of entities from reporting requirements, including banks, nonprofits, and certain large operating companies. FinCen provides a “Small Entity Compliance Guide” on its website to help determine whether your company qualifies for an exemption.

What do I Report? Reporting companies must report identifying information of their beneficial owners, including names, dates of birth, addresses, and an identification number, like a driver’s license number. Reporting companies created on or after January 1, 2024, will also need to report their company applicant, the individual who directly files the document that creates or registers the company. All reporting companies must report identifying information about itself, including legal name, address, and taxpayer identification number.

When do I Report? Reporting companies created prior to January 1, 2024, will have until January 1, 2025, to submit an initial BOI report to FinCEN. Reporting companies created on or after January 1, 2024, must submit an initial BOI report within 30 calendar days of formation. However, FinCen recently proposed new regulations which could extend the reporting deadline for newly formed companies to 90 days after formation instead of 30 days. If there is any change to the required information about your company or its beneficial owners, your company must file an updated report within 30 days after the date of change.

How do I Report? Reporting companies must report BOI electronically through FinCen’s website. Information reported is stored in a secure, non-public database with limited access.

Are there Penalties for Non-Compliance? Yes, the Act provides both civil and criminal penalties for any person violating the reporting requirements. Violators can face fines up to $500 per day for each violation, with a maximum fine of $10,000 per willful violation, and imprisonment and other criminal penalties for egregious violations.

Please contact one of our business law attorneys with questions on what actions your company should take to comply with these new requirements.