In an effort to combat what the government believes to be rampant money laundering and other illicit financial activities by certain entities, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) is rolling out new beneficial ownership reporting requirements. These regulations, stemming from the Corporate Transparency Act (CTA), require that qualifying businesses operating within the United States submit detailed information about their beneficial owners.
This new law went into effect on January 1, 2024, but entities that existed before that date do not have to file their first report until the January 1, 2025 deadline. New entities must file within 90 days of registration.
Understanding the criteria for reporting entities and beneficial owners is vital to avoid penalties and keep your company in compliance.
What Companies Are Required to Report Beneficial Ownership Information (BOI)?
Identified as reporting companies, two main categories exist:
- Domestic Reporting Companies: This group includes corporations, limited liability companies (LLCs), and other entities established by filing a document with a secretary of state or a similar office within the United States.
- Foreign Reporting Companies: These are entities, like corporations and LLCs, formed under foreign country laws but registered to do business in the U.S. by filing a document with a state secretary or equivalent.
State-specific filing requirements can vary, particularly for entities like statutory and business trusts. If your entity requires filing with a state office, it falls under the reporting company category and must submit Beneficial Ownership Information (BOI) with FinCEN.
What Entities Are Exempt From Beneficial Reporting Requirements?
There are 23 entity types listed by FinCEN as exempt entities:
- Securities reporting issuer
- Governmental authority
- Credit union
- Depository institution holding company
- Money services business
- Broker or dealer in securities
- Securities exchange or clearing agency
- Other Exchange Act registered entity
- Investment company or adviser
- Venture capital fund adviser
- Insurance company
- State-licensed insurance producer
- Commodity Exchange Act registered entity
- Accounting firm
- Public utility
- Financial market utility
- Pooled investment vehicle
- Tax-exempt entity
- Entity assisting a tax-exempt entity
- Large operating company
- Subsidiary of certain exempt entities
- Inactive entity
What is a Beneficial Owner and What Information is Required?
A beneficial owner is defined as an individual who, directly or indirectly, holds substantial control over the reporting company or owns or controls at least 25% of the company’s ownership interests. “Substantial control” includes being a senior officer, having the power to appoint or remove certain officers or a board majority, serving as a key decision-maker, or possessing any other form of significant control.
“Substantial control” may be hard to define for certain companies, especially smaller entities, so FinCEN has established a Small Entity Compliance Guide to answer common questions.
The required information for each beneficial owner includes:
- Personal and company names;
- Personal and company addresses;
- Date of birth;
- Identifying number and issuer from a valid U.S. driver’s license, U.S. passport, or state-issued ID (including U.S. territories or tribes). If unavailable, a non-expired foreign passport will suffice. An image of the document is also required.
Rely on Ivory Law Group for Your Reporting Requirements
If you’re not certain if these reporting requirements impact your business, Ivory Law Group is ready to assist. Our dedication to delivering in-house counsel-level service allows us to seamlessly integrate our services into your day-to-day, and we will ensure your business complies with FinCEN’s regulations efficiently and effectively. Contact us to verify your obligations under this new law and to submit the necessary information accurately by the deadline.