In light of the Corporate Transparency Act, enacted on January 1, 2021, we aim to inform you about significant changes to anti-money laundering legislation and the introduction of new reporting requirements for certain U.S.-based businesses. Starting in 2024, a broad segment of small enterprises will be required to disclose information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). This initiative is designed to facilitate the creation of a national database, aiding national security and law enforcement agencies in their efforts to prevent the misuse of shell companies for illicit purposes.
Reporting Obligations:
Both domestic and foreign entities that have registered through a state’s Secretary of State (SOS) or a comparable agency fall under these requirements. This includes corporations, limited liability companies (LLCs), and other entities formed or registered with such agencies.
Exemptions:
Certain businesses are exempt from these reporting requirements, especially those that are already mandated to report ownership information to a regulatory authority. Large operating companies, characterized by having more than 20 full-time employees in the U.S. and reporting over $5 million in gross receipts from U.S. sources on their last federal tax return, are not subject to these new requirements.
Information Requirements:
The Beneficial Ownership Information (BOI) that must be reported includes the full legal name, date of birth, address, and a unique identification number from a valid document (e.g., U.S. passport, state driver’s license, or other government-issued ID) for each beneficial owner and, for entities formed or registered after 2023, the company applicants.
Beneficial Owner Definition:
Beneficial owners are identified as individuals who either directly or indirectly own or control at least 25% of the entity’s ownership interests or have substantial control over the entity. Substantial control is defined as authority over significant decisions regarding the entity’s business, finances, and structural organization.
FinCEN Identifiers:
Individuals and entities have the option to obtain a FinCEN Identifier, allowing them to use this unique number instead of submitting detailed personal information. This can be particularly beneficial for individuals associated with multiple reporting entities.
Filing Deadlines:
Entities established before 2024 are required to submit their initial report by January 1, 2025. For those established in 2024, the initial report is due within 90 days after their creation or registration. Any changes to previously reported information must be updated within 30 days.
Filing Instructions:
Submission of BOI reports must be conducted electronically via FinCEN’s e-filing portal, offering two methods: a web-based form submission or uploading a completed PDF of the report. Certain third-party services may also facilitate this filing process.
While we are ready to provide additional insights and explanations, we highly advise consulting with a legal advisor to ensure proper compliance with this filing. Our clients will be receiving further information regarding these reporting requirements.Additionally, FinCEN offers a comprehensive Small Entity Compliance Guide and a list of frequently asked questions designed to assist businesses in understanding the reporting obligations. You can access these resources at www.fincen.gov/boi/small-business-resources
