Congress enacted the Corporate Transparency Act in 2021, which created a beneficial ownership information (“BOI”) reporting requirement as part of the U.S. government’s efforts to make it increasingly difficult for individuals to benefit from misbegotten gains or hide via shell companies.
As a result, many U.S. companies must report information about their beneficial owners, i.e., the individuals who ultimately own or control the company, beginning on January 1, 2024. Such companies will have to report the information to the Financial Crimes Enforcement Network, which is a bureau of the U.S. Department of the Treasury (“FinCEN”). In this post, we answer four questions regarding these new BOI reporting requirements.
- Who Has to Report? Companies obligated to report are called “reporting companies” and may be required to procure information from their beneficial owners and report that information to FinCEN if the company is either: (a) formed or created in the U.S., or (b) a foreign company registered to do business in any U.S. state or Indian tribe.
- Who Does Not Have to Report? There are 23 types of entities which are exempt from the BOI reporting requirements and therefore do not meet the definition of a reporting company. These entities include, for example, banks, accounting firms, insurance companies, investment advisors, and tax-exempt entities.
- How Do I Report? Reporting companies must report BOI electronically through FinCEN’s website. FinCEN’s system will provide the filer with confirmation once a completed report is filed.
- When Do I Report? FinCEN will begin accepting reports starting on January 1, 2024. If a company was created or registered prior to January 1, 2024, it will have until January 1, 2025 to report BOI. If a company is created or registered on or after January 1, 2024, it must report BOI within 90 days of notice of creation or registration. FinCEN cannot accept reports before January 1, 2024.
Note: Importantly – willfully providing false information or failing to report or update BOI may result in significant penalties. The civil penalty for a violation is $500 per day, while criminal penalties include fines of up to $10,000, imprisonment for up to two years, or both.
The attorneys at FLS have experience working with FinCEN and its reporting requirements. If you have any questions, or if you otherwise need assistance with preparing, submitting, or updating the report, please reach out to us and we will be more than happy to answer any questions and assist you!
Shawn is an attorney with 20 years of experience in business law, business and general litigation, banking law, real estate, creditors’ rights, employment law, and personal injury law. Shawn is admitted to practice in the state and federal courts of Connecticut, Nebraska, and Iowa.