Broker Check
New Beneficial Ownership Reporting Requirements

New Beneficial Ownership Reporting Requirements

January 15, 2024

As we progress into 2024, it is now mandatory for small businesses, private companies, and other entities to submit their Beneficial Ownership Information (BOI) to the Treasury Department's Financial Crimes Enforcement Network (FinCEN).

The Corporate Transparency Act (CTA), passed by Congress in 2021, requires both foreign and domestic reporting companies to disclose BOI when filing incorporation documents with state secretaries or tribal authorities.

This registry aims to aid FinCEN and law enforcement in identifying the individuals behind corporations and shell companies, facilitating the detection and apprehension of those involved in money laundering, financing terrorist groups, and other financial crimes.

As we embark on this new year, it is crucial for business owners to familiarize themselves with these reporting obligations. Here's what you need to know:

Reporting Requirements:

Starting January 1, 2024, corporations, limited liability companies (LLCs), or any other entities created in the U.S. by filing with the Secretary of State are obligated to report information about individuals who own or control the company.

Exemptions:

While the reporting mandate is broad, there are 23 exemptions outlined in the legislation, which includes public companies, banks, credit unions, broker-dealers, securities exchanges, investment advisers, venture capital fund advisers, insurance companies, Commodity Exchange Act registered entities, accounting firms, public utilities, tax-exempt entities, large operating companies, inactive entities, and more.

Large operating companies are defined by FinCEN as having 20 or more full-time U.S.-based employees, having physical operations in the United States, and having generated more than $5 million in gross receipts or sales on their most recent federal income tax return. It is crucial for businesses to thoroughly understand these exemptions to determine whether they qualify for relief from filing requirements.

Transition Period:
Companies formed before January 1, 2024, have until January 1, 2025, to submit their initial beneficial ownership reports. On the other hand, entities created on or after January 1, 2024, are subject to a tighter reporting timeline.

Reporting Deadlines:

  • For companies created before January 1, 2024: Reports must be submitted by January 1, 2025.
  • For companies created on or after January 1, 2024: Reports must be submitted within 90 days of creation.

An exception exists for entities created on or after January 1, 2025, where reports must be submitted within a more stringent 30-day window.

Information Resource:

The Financial Crimes Enforcement Network (FinCEN) provides a comprehensive source of information about beneficial ownership reporting. Businesses can access additional details and resources at FinCEN's Beneficial Ownership Information.

Professional Guidance:

While businesses can seek information about reporting requirements from their CPA, it’s essential to involve legal expertise. Attorneys play a pivotal role in ensuring that the correct forms are filed, navigating exemptions and avoiding potential legal pitfalls.

The Corporate Transparency Act indicates a significant shift in the regulatory landscape for small businesses. As we enter the era of increased corporate transparency, it’s imperative for companies to understand their reporting obligations, explore exemptions, and engage legal professionals to navigate the complexities of compliance.

If you would like to learn more or to figure out how to get started, please follow this link: https://boiefiling.fincen.gov/.

Source: Compliance Week, 2024