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 obligations for the purpose of detecting, preventing and punishing terrorism, money laundering and other misconduct through opaque ownership structures.  A “beneficial owner” is 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 which may be helpful to determine whether your company qualifies for an exemption.

What do I Report? All reporting companies must report identifying information about itself, including full legal name, street address, the jurisdiction of its formation, and taxpayer identification number. All reporting companies must also report identifying information of their beneficial owners, including the individual’s legal name, date of birth, residential address, and unique identification number from an identifying document, like a driver’s license, along with an image of the identifying document. Reporting companies created on or after January 1, 2024, will also need to report this same identifying information of their company applicant(s): (1) the individual who directly files the document that creates or registers the reporting company, and (2) the individual who is primarily responsible for directing or controlling that filing.

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, and before January 1, 2025, must submit an initial BOI report within 90 calendar days of formation. Reporting companies created on or after January 1, 2025, must submit an initial BOI report within 30 calendar days of formation.  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 that the change occurs.

How do I Report? Reporting companies must report BOI online into a reporting system called the Beneficial Ownership Secure System (BOSS) via a portal on the FinCen 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 a civil penalty of $500 per day for each continuing day of violation, and a criminal penalty consisting of a fine of up to $10,000, imprisonment of up to two years, or both.

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