tarting January 1, 2024, beneficial ownership information reporting under the Corporate Transparency Act has officially become the law of the land. Under the new law, certain U.S.- and foreign-based companies have to report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).
If you own, run, or are starting a U.S.-based corporation or a foreign-owned company registered to do business in the U.S., it’s critical to understand whether this law affects you—and the steps you may need to take to maintain compliance.
Read on to find out whether the law applies to your business, what information you’ll need to disclose, and answers to other common questions about BOI reporting.
What is a Beneficial Owner?
A beneficial owner is any individual who directly or indirectly owns 25% or more equity interest in a reporting company. For example, if you own 30% of an LLC, you would be subject to the beneficial ownership information reporting rule.
The term “beneficial owner” also includes anyone with substantial control over the reporting company. Senior company officers, such as the company’s president, CEO, CFO, general counsel, and anyone with significant decision-making ability, can fall into this category.
To help businesses identify beneficial owners, FinCEN has compiled a Small Entity Compliance Guide with detailed checklists and examples.
Why is Beneficial Ownership Reporting Required Now?
Although more than 2 million corporations and limited liability companies are formed annually in the United States, most states require little (if any) information about their beneficial owners.
Most of these corporations are legitimate business ventures, but a lack of regulation made it easy for bad actors to anonymously create entities known as shell companies. These empty corporations obscure a person’s financial ties to illicit and illegal activities, ranging from money laundering and securities fraud to drug and human trafficking.
With the passage of the Corporate Transparency Act in 2021, Congress aimed to make things more transparent by implementing beneficial ownership information reporting requirements. These requirements help investigators trace suspicious funds and activities back to the people actually breaking the law by making it harder for criminals to hide behind fake corporations with opaque ownership structures.
Which Businesses Need to Report Beneficial Owners?
Nearly all domestic and foreign corporations and LLCs engaged in commerce or business activity within the U.S. must report their beneficial owners under the Corporate Transparency Act.
However, the Act does make exceptions for specific business entities who already report their ownership information elsewhere, including:
- Publicly traded companies
- Federal, state, and local government agencies
- Banks, credit unions, and securities brokers/dealers
- Investment companies and advisers
- Insurance companies
- Non-profits
In addition, large private companies with over 20 full-time U.S. employees, over $5 million in gross receipts or sales and an operating presence at a physical office in the U.S. are exempt from reporting requirements if they simultaneously meet all of these criteria.
FinCEN provides a detailed list of the 23 types of exempt entities. If your business does not fall into one of those exemption categories, you will likely need to disclose your beneficial owners to maintain compliance with the BOI rule.
What Information Do You Need to Report on Beneficial Owners?
To report your company’s beneficial owners, you need to provide specific identifying details to FinCEN on their official BOI form. Have the following information about your beneficial owners ready before you file your report:
- Full legal name
- Date of birth
- Current residential address
- Unique identifying number from an acceptable identification document
Acceptable identification documents include passports and U.S. driver’s licenses. They have to include the issuing state’s name or jurisdiction. Reporting companies also have to submit an image of the identification document.
You’ll also need to submit details about the reporting company itself, including:
- The full legal business name
- Any “doing business as” (d/b/a) or “trading as” (t/a) names
- Your company’s current street address
- The jurisdiction where you initially formed the business
- Your business tax identification number (TIN)
Foreign reporting companies should report the address they conduct their business from in the U.S. and a tax identification number issued by a foreign jurisdiction (along with the name of the jurisdiction).
How Do You Submit the Beneficial Ownership Forms?
Submit all BOI reporting directly to FinCEN through their secure online reporting system. You should expect to register your business through the FinCEN portal and create a login tied to your entity.
What is the Deadline for Reporting Beneficial Ownership Information?
The Corporate Transparency Act offers generous reporting timelines for businesses.
- Businesses formed before January 1, 2024, must complete their beneficial ownership information report by January 1, 2025.
- Businesses formed after January 1, 2024, but before January 1, 2025, must report their beneficial owner information within 90 calendar days of official or public notice that the company’s creation or registration is effective.
- Businesses formed after January 1, 2025, will have 30 calendar days from the actual or public notice of the company’s creation or registration to file a BOI report with FinCEN.
Businesses also have to report any change in beneficial ownership information to FinCEN within 30 days of the change.
What are the Penalties for Not Reporting Beneficial Ownership Information?
FinCEN’s website is clear: They understand this is a new requirement, so you likely don’t need to worry immediately about accidental or minor errors on your report—just make sure to correct them as soon as you realize there’s a problem.
That said, individuals and corporate entities who intentionally fail to report BOI or file false information can face substantial penalties. These include a $500-per-day civil penalty, a $10,000 criminal penalty and up to two years in prison.
Can You Make Beneficial Ownership Information Private?
The Corporate Transparency Act requires FinCEN to maintain confidentiality around beneficial ownership information reporting, so there is no need to worry about your company’s ownership details being shared openly or published publicly on business entity registries. FinCEN will also store all beneficial ownership information in a secure, non-public database that follows Federal guidelines for sensitive information security.
Although FinCEN will not make BOI information publicly available, certain federal and state law enforcement agencies can request access to your beneficial ownership information if they are actively engaged in “authorized activities related to national security, intelligence, and law enforcement.” FinCEN will also provide financial institutions access to beneficial ownership information with the consent of the reporting company.
Beneficial Ownership Information Reporting: 2024 is the Year to Get Compliant
On the surface, the Corporate Transparency Act’s beneficial ownership information reporting requirements can seem like another regulatory hurdle. But the new law will ultimately help foster a more transparent and accountable corporate environment that gives lawbreakers fewer places to hide from law enforcement.
Don’t wait until the last minute! Starting early will give your business plenty of time for thorough research and preparation so you can go through the compliance process stress-free. Visit FinCEN’s website now that the new law has gone into effect, and check this important task off your to-do list.
