New Beneficial Ownership Reporting Requirements for U.S. Companies

Starting January 1, 2024, a major regulatory change will require certain U.S. and foreign businesses to file a "Beneficial Ownership Information" (BOI) Report. The U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) is overseeing this change, aimed at enhancing transparency and accountability. Here's what businesses need to know:

Who Must File?

1. "Reporting Companies" are obliged to report beneficial ownership details. They encompass:

   • Corporations

   • Limited liability companies

   • Entities created through state secretary registration

   • Foreign corporations or LLCs registered to operate in the U.S.

2. Exceptions: Not every entity falls under this mandate. There are 23 exemptions listed in 31 C.F.R. § 101.380(c)(2). These span a variety of sectors, from banks and credit unions to tax-exempt entities and public utilities. A significant note is the exclusion of “large operating companies” - those with:

   • 20+ full-time employees

   • Over $5 million in annual gross receipts/sales

   • A non-residential physical U.S. office.

When to File?

• For Companies Existing Before January 1, 2024: They can start filing in January 2024, but must wrap up by January 1, 2025, to sidestep penalties.

• For Companies Formed After January 1, 2024: They need to file within 30 days of official state notice or public registry listing.

• Updates & Corrections: If there are changes in beneficial ownership, company details, or reported owner information, updates should be submitted within 30 days. Corrected reports have the same 30-day window upon recognizing an error.

What Information is Required?

1. Reporting Company Information:

   • Legal and trade names

   • Primary business address

   • Jurisdiction of formation

   • Taxpayer ID

2. Beneficial Owner Details: This pertains to anyone with a significant stake or influence in the company.

   • Full name

   • Birthdate

   • Residential address (no P.O. boxes or agent addresses)

   • Unique ID (from a driver’s license, state ID, or passport)

   • Associated document image

3. Company Applicant Data: This person is responsible for the company’s formation.

   • Full name and birthdate

   • Address (residential or business, depending on the applicant's role)

   • Unique ID and related document image

   Note: For companies created after January 1, 2024, the attorney’s personal details will be part of the record if they are involved in the formation.

The process is expected to be efficient; FinCEN approximates a 90-minute duration for a typical small business to file the report.

Where to File?

Companies can submit their reports via a designated portal on the FinCEN website from January 1, 2024, onward. As the date nears, further guidelines and portal access information will be shared by FinCEN.

In summary, the new BOI reporting requirements represent a significant shift in the regulatory landscape for businesses. Companies are advised to familiarize themselves with these guidelines and ensure they are prepared to comply by 2024.

Disclaimer: This blog post is intended for informational purposes only and does not constitute legal advice. Always consult with a qualified attorney for any legal decisions.