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Beneficial Ownership Information Reporting
Here's what corporate customers need to know about the new beneficial ownership reporting requirements going into effect January 1, 2024.
New and existing corporate customers should begin familiarizing themselves with the new law that will require beneficial ownership information (BOI) to be reported. Effective January 1, 2024, corporations, limited liability companies (LLCs) and other entities formed under state law (domestic reporting companies) or similar entities formed under foreign law and registered to do business in the U.S. (foreign reporting companies), are required to report their beneficial ownership to the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCen). Failure to comply will result in penalties.
- Entities created or registered prior to January 1, 2024, will have one calendar year to file their BOI reports with FinCEN.
- Entities created or registered on or after January 1, 2024 and before January 1, 2025 will have 90 calendar days after their creation or registration to file their BOI reports with FinCEN.
- Entities created or registered on or after January 1, 2025, will have 30 calendar days after their creation or registration to file their BOI reports with FinCEN.
Frequently Asked Questions
The BOI reporting provisions are included in the Corporate Transparency Act (CTA), which is part of the Anti-Money Laundering Act of 2020 (AML Act). This rule strengthened the ability of FinCen and other agencies to protect U.S. national security as well as prevent and combat money laundering, terrorist financing, tax fraud, and other illicit activity. Under the CTA, access to BOI will be granted to federal agencies engaged in national security, intelligence, and law enforcement activities. The Treasury Department will have access in connection with its other official duties, as well as state and local law enforcement agencies in connection with criminal or civil investigations.
Reports must be filed by domestic and foreign reporting companies. A domestic reporting company is defined as a corporation, LLC, or any entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe. A foreign reporting company is a corporation, LLC, or other entity formed under the law of a foreign country and registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office.
The rule requires reporting companies to file reports with FinCen that identify individuals who are beneficial owners and company applicants of the entity. The company applicant will usually be a beneficial owner of the company. Under the rule, a beneficial owner includes any individual who exercises substantial control over a reporting company, or who owns or controls at least 25% of the ownership interests of a reporting company. The company applicant can be defined as an individual who directly files the document that creates the entity or, in the case of a foreign reporting company, the document that first registers the entity to do business in the United States, as well as the individual who is primarily responsible for directing or controlling the filing of the relevant document by another.
The rule exempts five types of individuals from the definition of beneficial owner. The following are not considered beneficial owners of a reporting company:
- A minor child, provided that the reporting company reports the required information of the minor child's parent or legal guardian
- An individual acting as a nominee, intermediary, custodian, or agent on behalf of another individual
- An individual acting solely as an employee of a reporting company in specified circumstances
- An individual whose only interest in a reporting company is a future interest through a right inheritance
- A creditor of the reporting company
Exemptions apply to corporations that fit the following criteria:
- They employ more than 20 full-time employees in the United States;
- They have an operating presence at a physical office in the United States; and
- They demonstrate more than $5 million in gross receipts or sales on their federal income tax return.
In the future, entities that fall below the exemption threshold will have 30 days to file a report. An updated report will be required if a reporting company later becomes eligible for the exemption.
Besides this exemption, the proposed regulations include 23 statutory exemptions from the definition of a reporting company. Here are some noteworthy exemptions:
- Securities and Exchange Commission (SEC) reporting companies
- Regulated financial service companies including banks, credit unions, depository institution holding companies, registered securities broker-dealers, registered investment companies and investment advisers, venture capital fund advisors, and pooled investment vehicles
- Entities registered pursuant to the Commodity Exchange Art
- Tax-exempt entities
- Subsidiaries of certain exempt entities
- Large operating companies
- Accounting firms
- Inactive businesses
The full list of exemptions from beneficial ownership information reporting can be found in the final rule by the Financial Crime Enforcement Network in the National Archives of the Federal Registrar. Click the link to the right for the full list of exemptions.
The report will include information about your company and information about individual beneficial owners and company applicants. You will need to include:
- Full legal name
- Any trade name or "doing business as" name
- Current and complete street address for the main place of business or headquarters
- Jurisdiction of formation
- Federal taxpayer identification number (TIN)
Each beneficial owner and company applicant must also provide FinCen with their full legal name, birthdate, current residential street address, identifying number from a driver's license, passport, or state ID, and an image to authenticate their identity. Filed reports will not be publicly available and are not subject to Freedom of Information Act (FOIA) requests.
In the event that there are changes or inaccuracies to information you have previously reported, the reporting company is required to file an update within 30 calendar days after the date the change occurred. Reporting companies created or registered before January 1, 2024, will have one calendar year (January 1, 2025) to file their initial reports, while reporting companies created or registered after the effective date will have 30 days after receiving notice of their creation or registration to file their initial reports. FinCen is currently developing a new IT system, the Beneficial Ownership Secure System (BOSS), which will be used to collect, store, and maintain BOI reports.
Beneficial Ownership Information Reporting Scams
FinCen has been notified of fraudulent attempts being made to solicit information from corporations who may be subject to future reporting requirements under the Corporate Transparency Act. The fraudulent correspondence may be titled "Important Compliance Notice" and will ask the recipient to click on a URL or scan a QR code. These emails or letters are fraudulent. FinCen does not send unsolicited requests for information. If you receive a correspondence like this, do not respond, do not click any links, and do not scan any QR codes within the letter or email. FinCen will not be accepting BOI reports before January 1, 2024.