As of January 1, 2024, the business landscape in the United States has entered a new era of corporate transparency. The Financial Crimes Enforcement Network (FinCEN) has launched a groundbreaking initiative: the Beneficial Ownership Information (BOI) reporting system. This new regulation, stemming from the Corporate Transparency Act of 2021, requires millions of businesses across the country to submit previously undisclosed information to a newly created federal database.[1]
For many business owners, this represents an unprecedented shift in reporting obligations. For the first time, companies must file reports detailing the individuals who ultimately own or control them, a process aimed at combating illicit financial activities and enhancing national security.[2] This new requirement affects a wide range of entities, from small LLCs to larger corporations, introducing a significant compliance task that many businesses have never encountered before.
In this guide, we’ll walk you through the key aspects of this new reporting requirement, helping you navigate this unfamiliar terrain and ensure your business remains compliant in this new regulatory environment.
As we delve into the specifics of this new regulation, it’s crucial to understand that this is not merely an addition to existing paperwork – it’s an entirely new system with its own set of rules, deadlines, and potential penalties. The creation of this registry marks a pivotal moment in U.S. corporate governance, and understanding its requirements is now an essential part of business operations.
Key Points of BOI Reporting Requirements
1. Who Must Report: Most corporations, limited liability companies (LLCs), and other entities created by filing with a secretary of state or similar office are required to report.[3]
2. Required Information: Companies must report details about their beneficial owners – individuals who directly or indirectly exercise substantial control over the entity or own or control at least 25% of the ownership interests.[4]
3. Reporting Deadlines:
o Existing companies (created or registered before January 1, 2024): Must file by January 1, 2025. [5]
o New companies created in 2024: Have 90 calendar days to file after receiving notice of effective creation or registration.[6]
o New companies created from January 1, 2025 onward: Must file within 30 calendar days of receiving notice of effective creation or registration.[7]
4. Company Information: The reporting company must also submit certain information about itself, such as its name(s) and address.[8]
5. Company Applicants: Reporting companies created on or after January 1, 2024, are required to submit information about the individuals who formed the company.[9]
6. Ongoing Obligation: BOI reporting is not an annual requirement. A report only needs to be submitted once, unless the filer needs to update or correct information.[10]
7. Penalties for Non-Compliance: Willful failure to report or providing false information can result in civil and criminal penalties, including fines (of $500 per day the violation continues, up to $10,000) and imprisonment for up to two years.[11]
How Our Firm Can Help
Given the complexity of these new requirements, many businesses may find themselves in need of expert guidance. Our experienced business law team is equipped to assist you in several ways:
1. Determining if your business is subject to the reporting requirements
2. Identifying your company’s beneficial owners and those who exercise substantial control
3. Gathering the necessary information for reporting, including proper identification documents
4. Preparing and filing the required reports through FinCEN’s system
5. Ensuring compliance with deadlines based on your company’s creation or registration date
6. Developing systems to track changes that may require updated filings
7. Providing ongoing support for any necessary updates or corrections to your BOI report
Contact Us for Assistance
Ensuring compliance with FinCEN’s BOI reporting requirements is crucial for protecting your business from potential penalties. For assistance with BOI reporting or any other business law matters, please contact us.
When you reach out, mention this article so we can best address your BOI-related concerns. Our team is committed to helping businesses navigate these new requirements effectively and efficiently. We can help clarify any uncertainties, assist with information gathering, and ensure your filings are accurate and timely.
Footnotes:
[1] Corporate Transparency Act, Title LXIV of the National Defense Authorization Act for Fiscal Year 2021, Public Law 116-283, 134 Stat. 3388 (2021).
[2] The Corporate Transparency Act (CTA), enacted in 2021 as part of the Anti-Money Laundering Act of 2020, represents a pivotal shift in U.S. corporate law. This bipartisan legislation aims to curb illicit finance by requiring many companies doing business in the United States to report information about the individuals who ultimately own or control them. As Treasury Secretary Janet L. Yellen stated, “The launch of the United States’ beneficial ownership registry marks a historic step forward to protect our economic and national security. Corporate anonymity enables money laundering, drug trafficking, terrorism, and corruption.” U.S. Department of the Treasury Press Release, “U.S. Beneficial Ownership Information Registry Now Accepting Reports,” January 1, 2024.
[3] 31 CFR § 1010.380(c).
[4] 31 CFR § 1010.380(d).
[5] See fn. 2.
[6] 31 CFR § 1010.380(a)(1)(i)(A).
[7] 31 CFR § 1010.380(a)(1)(i)(B).
[8] 31 CFR § 1010.380(b)(1)(i).
[9] 31 CFR § 1010.380(b)(1)(ii).
[10] 31 CFR § 1010.380(a)(2).
[11] 31 U.S.C. § 5336(h)(3)(A).