What is it?
On September 30, 2022 the US Treasury’s Financial Crimes Enforcement Network
(FinCEN) issued final rules requiring beneficial ownership reporting, particularly for small
business. The rule requires reporting companies to file reports with FinCEN that
identify two categories of individuals: (1) the beneficial owners of the entity; and (2)
the company applicants of the entity. This rule requires most corporations, LLC’s and
similar entities created in or registered to do business in the United States to report
information about their beneficial owners (BOI or beneficial ownership information) to
FinCEN. The rules came out of the Corporate Transparency Act (CTA) passed by
Congress in 2021.
The objectives of reporting are for the Federal government to create a national database
of information concerning the individuals who, directly or indirectly, own a substantial
interest in, or substantial control over (beneficial owners) certain types of domestic and
foreign legal entities.
The information provided by the Reporting Companies about their Beneficial Owners
and Company Applicants (Beneficial Ownership Information, or “BOI”) will be maintained
by FinCEN in a secure national database called the Beneficial Ownership Secure System,
or “BOSS”. Access to the information on the BOSS will only be available to certain law
enforcement agencies, taxing authorities, and a limited number of other potential users for
specified purposes upon request.
Who is subject to this?
Foreign or domestic:
- C Corporations
- S Corporations
- Limited Liability Companies (LLC)-multiple member (MMLLC) or single member (SMLLC)
- Limited Liability Partnerships (LLP)
- Limited Liability Limited Partnerships (LLLP)
Other types of legal entities, including sole proprietors and certain trusts, are excluded
from the definitions to the extent that they are not created by the filing of a document with
a secretary of state or similar office. FinCEN recognizes that in many states the creation
of most trusts typically does not involve the filing of such a formation document.
Are there any companies not subject? (Unless state requires official filing for creation)
- Sole proprietor businesses (unless SMLLC)
- Rental property sole owners (unless SMLLC)
- Farmers (unless SMLLC)
- General partnerships that are not LLC’s
- Grantor trusts
- Charitable trusts
- Irrevocable trusts
Large Company Reporting Exemption
- More than 20 full time employees in the United States, and
- Physical office in the United States, and
- Prior year US tax return reflecting at least $5,000,000 in revenues.
What information do I need to report?
When filing BOI reports with FinCEN, the rule requires a reporting company to identify
itself and report four pieces of information about each of its beneficial owners:
- Name,
- Birthdate,
- Address,
- Unique identifying number and the issuing jurisdiction from one of the following documents: (i) a non-expired passport issued to the individual by the United States
government, (ii) a non-expired identification document issued to the individual by
a State, local government, or Indian tribe for the purpose of identifying the
individual, (iii) a non-expired driver’s license issued to the individual by a State, or
(iv) a non-expired passport issued by a foreign government to the individual, if the
individual does not possess any of the other documents described, and
- An image of the document from which the unique identifying number (above #4)
was obtained. Additionally, the rule requires that reporting companies created after
January 1, 2024, provide the four pieces of information and document image for
company applicants.
How often do I need to file this new form?
Initial Reporting: New companies formed after 1/1/2024 within 90 days of formation
Companies formed before 1/1/2024 by 1/1/2025
Updates: With any change in beneficial ownership, business name, address change or government ID, you must refile within 30 days of the change. This is for any change to the business or the beneficial owner information.
Annual reporting: None
Are there any penalties if I don’t file or update the reports timely?
A civil penalty of up to $500 per day may be imposed for each day that a person continues
a violation until the violation is remedied. A criminal fine of up to $10,000 and/or
imprisonment of up to two years may also be imposed.
Can Fox Peterson help me file?
Yes, we are happy to help. At this time (7/3/2024) we recommend that you wait to file until further information is available. There is currently a court case that could change these requirements or it could remain the same. The law is in effect so all newly formed entities that are/were formed during 2024 must file within 90 days. Existing entities still have to file by the end of the year. We will work to keep you up to date on any changes to our recommendation.
Alternatively, anyone can file their own reports. Simply go to the following website to get started. We still recommend that you wait to do this until later in the year in case we receive additional guidance or changes. A word of caution; because of the sensitive nature of the information being reported, beware of any third-party companies offering to file for free on your behalf!
