New Reporting Requirement for Many Companies begins January 1, 2024
Beginning January 1, 2024, many companies in the United States will have to report information about their beneficial owners, i.e., the individuals who ultimately own or control the company. They will have to report the information to the Financial Crimes Enforcement Network (FinCEN) which is a bureau of the U.S. Department of the Treasury.
This information reporting rule is aimed at enhancing transparency and preventing illicit activities such as money laundering and terrorism financing.
The new report, called the Beneficial Ownership Information (BOI) report will be filed electronically with FINCEN beginning January 1, 2024. Due to the nature of this filing, it will not be filed by your accountant but should be discussed with your attorney.
Existing companies subject to these requirements have until January 1, 2025 to file their first BOI report.
Who must file?
Your company may be a reporting company and will need to report information about its beneficial owners if your company is:
1. A corporation, a limited liability company (LLC), or was otherwise created in the United States by filing a document with a secretary of
state or any similar office under the law of a state or Indian tribe
2. A foreign company and was registered to do business in any U.S. state or Indian tribe by such a filing.
Exemptions: Twenty-three types of entities are exempt from being classified as "reporting companies" they include:
- 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 Investment 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
When must I file?
Reports will be accepted starting on January 1, 2024.
- Companies Existing Before 2024: If your company was created or registered before January 1, 2024, you have until January 1, 2025, to file your first BOI report.
- Companies Created or Registered in 2024: If your company is created or registered anytime in 2024, you have 90 days from when you're notified (or when it's publicly announced) about your company's creation or registration to file your first BOI report.
- Companies Created or Registered After 2024: If your company is created or registered from January 1, 2025, onwards, you have 30 days from notification or public announcement to file your first BOI report.
How do I file the report?
You can file online using the BOI E-Filing System to electronically file the Beneficial Ownership Information Report (BOIR) under the Corporate Transparency Act (CTA).
What must I report?
You need to report on:
- Beneficial Owners. These are individuals with a significant ownership stake (25% or more) in your company.
- Reporting companies must provide name, birthdate, address, and a unique identifying number (with the document image) for each beneficial owner.
- Five types of individuals are exempt from being considered beneficial owners:
Minor Child: If the individual is a minor child, as defined by the state or tribal law where the company is created or first registered, they are exempt. The reporting company can report the parent or legal guardian's information instead. However, this exemption ends when the minor reaches the age of majority, and if they are then a beneficial owner, their information must be reported.
Nominee, Intermediary, Custodian, or Agent: If an individual is acting merely as a nominee, intermediary, custodian, or agent on behalf of an actual beneficial owner, they are exempt. This often applies to individuals performing ordinary advisory or other contractual services, like tax professionals. The actual beneficial owner must still be reported.
Employee: An employee is exempt if they meet three criteria: they must be an employee as defined by federal regulation, their control or economic benefits from the company must be solely due to their employment status, and they must not be a senior officer of the company.
Inheritor: Individuals whose only interest in the company is a future right of inheritance (e.g., through a will) are exempt. This exemption ends once the individual inherits the interest and may then qualify as a beneficial owner.
Creditor: If an individual is a creditor of the company, meaning their beneficial owner status is solely through rights for payment (like a loan or debt to the company), they are exempt. This applies as long as this entitlement is their only ownership interest in the company.
- Company Applicants: Companies who were created or registered to do business in the US on or after January 1, 2024, must report individuals who were instrumental in the filing or registration of your company.
Additional details are available online here https://www.fincen.gov/boi.