On January 1, 2024, new regulations came into effect, which require many companies to report ownership information to the U.S. government by January 1, 2025 and on an ongoing basis thereafter. These regulations, introduced by the Financial Crimes Enforcement Network (FinCEN)—a bureau of the Department of the Treasury tasked with combating domestic and international financial crimes— are aimed at combating the use of shell companies to perpetrate financial crimes, like money laundering.
Below is some helpful information to help you determine if your business may be required to report under this regulation and, if so, more information on what and when you must report.
Who is required to report?
In general, if you are doing business through a corporation, LLC, or any other type of entity that is registered with a secretary of state or similar authority in the United States, you will be required to report.
Specifically, under the regulations, companies required to report are called “reporting companies.” There are two types of reporting companies:
- Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the U.S.
- Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the U.S. by the filing of a document with a secretary of state or any similar office.
In addition, the regulation provides exemptions from the reporting requirements for 23 specified types of entities. Generally, these exemptions apply to entities like large publicly traded companies meeting specified requirements and nonprofits. Consult FinCEN’s Small Entity Compliance Guide (see Chapter 1.1, “Is my company a ‘reporting company’?”).
What information is required?
Per the regulations, a reporting company will have to file information pertaining to both itself and its “beneficial owners.” In general, this includes information, like name, date of birth, address, and identifying numbers (Tax ID Number, driver’s license number, passport number, etc.).
In addition, entities created after January 1, 2024, will have to report information on the individual who filed the original creation or first registration documents with the relevant government authority. If more than one person was involved in filing the creation documents, the business must also report on the individual primarily responsible for directing the entity’s creation.
Who is a beneficial owner?
A beneficial owner is defined as an individual who exercises “substantial control” over the reporting company, or owns or controls at least 25% of the reporting company’s ownership interests.
In general, senior officers and other key decision makers within a company would fall under the definition of an individual with “substantial control.” Consult FinCEN’s Small Entity Compliance Guide (see Chapter 2.1, “What is substantial control?”) for further information on “substantial control.”
How do I report?
Reporting companies can report electronically through FinCEN’s BOI E-Filing System.
When must I report by?
A reporting company created or registered to do business before January 1, 2024 will have until January 1, 2025 to file its initial beneficial ownership information report.
A reporting company created or registered on or after January 1, 2024 and before January 1, 2025 will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report. This 90-calendar day period begins at the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration—whichever is earlier.
Reporting companies created or registered on or after January 1, 2025 will have 30 calendar days from actual or public notice that the company’s creation or registration is effective to file their initial BOI reports with FinCEN.
Is there a fee?
No, FinCEN will not assess any fees for reporting.
Are there ongoing reporting requirements?
Yes. In general, there are two instances that would require subsequent filings by reporting companies:
- Changes in beneficial owners of a reporting company must be reported within 30 calendar days after the change occurs.
- If inaccurate information is reported, corrected reports must be filed 30 calendar days after the date your company became aware of the inaccuracy or had reason to know of it.
