2024 Beneficial Ownership Information Reporting

Beneficial Ownership Information Reporting:

What You Need to Know

If you own or operate a business in the United States, you may be required to report information about who ultimately owns and controls your company to the U.S. government. This is a new requirement that will take effect on January 1, 2024, as part of the Corporate Transparency Act (CTA), which aims to prevent the misuse of shell companies and other opaque ownership structures by bad actors.

In this article, we will explain what beneficial ownership information reporting is, who needs to file a report, what information needs to be reported, and how to file a report with the Financial Crimes Enforcement Network (FinCEN), the agency responsible for implementing the CTA.

What is beneficial ownership information reporting?

Beneficial ownership information reporting refers to providing identifying information about the individuals who directly or indirectly own or control a company. This includes their name, date of birth, address, and unique identifying number (such as a FinCEN ID, passport number, or driver's license number).

The purpose of reporting this information is to help law enforcement and other authorized users access it for authorized activities related to national security, intelligence, and law enforcement. For example, this information can help identify and investigate money laundering, tax evasion, fraud, terrorism financing, and other crimes involving shell companies.

Who needs to file a report?

The CTA requires certain privately held companies, known as reporting companies, to file a beneficial ownership information (BOI) report with FinCEN. A reporting company is any corporation, limited liability company (LLC), or similar entity that is:

• Created by filing a document with a secretary of state or a similar office under the law of a state or Indian Tribe; or

• Formed under the law of a foreign country and registered to do business in the United States by filing a document with a secretary of state or a similar office under the law of a state or Indian Tribe.

However, there are many exemptions for companies that are already subject to existing federal or state regulatory oversight or disclosure requirements. For example, the following types of entities are not considered reporting companies and do not have to file a BOI report:

• Publicly traded companies;

• Banks, credit unions, and other financial institutions;

• Insurance companies;

• Charities and nonprofit organizations;

• Churches and religious organizations;

• Entities that employ more than 20 full-time employees in the United States, file income tax returns in the United States demonstrating more than $5 million in gross receipts or sales, and have an operating presence at a physical office within the United States; and

• Many other entities listed in the CTA and the BOI reporting rule.

What information needs to be reported?

If your company is a reporting company, you need to file a BOI report that identifies two categories of individuals:

• The beneficial owners of the entity; and

• The company applicants of the entity.

• 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.

A company applicant is an individual who files an application to form or register an entity under state or tribal law. This could be an owner, manager, officer, director, or agent of the entity.

For each beneficial owner and company applicant, you need to report their:

• Full legal name;

• Date of birth;

• Current residential or business street address; and

• Unique identifying number from an acceptable identification document

FinCEN ID, passport number, driver's license number, etc.) or a FinCEN identifier obtained through FinCEN's secure online system.

You also need to provide some basic information about your company, such as its name, address, entity type, state or tribal identification number, and date of formation or registration.

Any domestic business created or registered before January 1st, 2024, must file by January 1, 2025. If your company was formed or registered after January 1, 2024, you need to file your first BOI report at the time of formation or registration or within 90 days. You also need to update your report within one year of any change in your beneficial ownership information.

FinCEN will store your reported information in a secure, non-public database that will only be accessible to authorized users for authorized purposes. FinCEN will also protect the confidentiality and privacy of your information and impose strict penalties for any unauthorized disclosure or misuse of it.

If you have any questions or need more information about the BOI reporting please contact our office at 512-354-7878.