Under a new federal rule (31 CFR 1010.380), effective January 1, 2024, many businesses are considered “Reporting Companies” and must report certain information about their beneficial ownership—identifying the individuals who substantially own or control the company—to the Financial Crimes Enforcement Network (FinCEN). The purpose of these new reporting requirements is to combat money laundering, terrorism financing, organized crime and other financial crimes.
Reporting Companies will need to file an initial report and subsequent updates when there are any changes to the initial information. The following summary of the new rule provides information about which companies are required to report, what they must report, and where and how they report. The information provided is only summary information and companies should consult the rule and seek legal guidance regarding important definitions and specific requirements that may apply to them.
You can find a small business beneficial ownership compliance guide here.
What are Reporting Companies?
Reporting companies include (1) domestic companies formed by filing a document with a secretary of state or similar office; and (2) foreign companies formed under the law of a foreign country and registered to do business in any state. “State” includes U.S. territories and Indian tribes.
In short, most U.S. companies are Reporting Companies, unless specifically exempted (discussed below).
What are Exempted Companies?
The following 23 company types are exempt from this mandatory reporting—most of these exempted companies are already subject to other significant regulation: security reporting issuer, Governmental authority, bank, 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 advisor, venture capital fund advisor, insurance company, state-licensed insurance provider, Commodity Exchange Act registered entity, account firm, public utility, financial market utility, pooled investment vehicle, tax-exempt entity, entity assisting tax-exempt entity, entity assisting tax-exempt entity, large operating company, subsidiary of certain exempt entities, inactive entity.
Unless exempted in the list above, then the company is a Reporting Company.
Who is a Beneficial Owner (BO)?
A BO is an individual who, directly or indirectly, exercises substantial control over a reporting company and/or who has at least a 25% ownership interest. Ownership interest is not required to exercise substantial control. Meeting any of the following criterion is enough to be a BO:
- An individual who is a senior officer
- An individual who has authority to appoint or remove certain officers or a majority of directors
- An individual who is an important decision-maker
- An individual who has any other form of substantial control over the reporting company
Who is a Company Applicant (CA)?
A Company Applicant is an individual who directly files or is primarily responsible for the filing of the document that creates or registers the company. A reporting company is required to report its company applicants if it is either (1) a domestic reporting company created on or after January 1, 2024; or (2) a foreign reporting company first registered to do business in the United States on or after January 1, 2024.
What Information is Reported?
- Information about the Reporting Company
- legal name, trade or d/b/a name,
- Address or location of formation or registration
- Tax ID number
- Information about each BO or CA
- Full legal name
- DOB
- Complete current home address for BO & complete business address for CA
- Unique identifying number and issuing jurisdiction from, and an image of, ONE of the following non-expired docs:
- U.S. Passport
- State DL
- ID document issued by state, local gov. or tribe
- If individual does not have one of above, foreign passport
Special Reporting Rules
There are four special reporting rules that impact what information needs to be reported:
- Owned by exempt entity
- Minor child
- Foreign pooled investment vehicle
- Company applicant reporting for existing companies
When are the Reporting Deadlines?
Reporting Companies in existence prior to January 1, 2024, must file an initial report by January 1, 2025.
Reporting Companies created or registered to do business in the United States on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving actual or public notice that the company’s creation or registration is effective to file its initial report.
Reporting Companies created or registered on or after January 1, 2025, it will have 30 calendar days from actual or public notice that its creation or registration is effective to file its initial report.
Any formerly exempt Reporting Company must file an initial report within 30 days of losing its exemption.
How to File a Beneficial Ownership Interest Report
Reporting companies should file the initial report electronically through a secure online filing system. You can find a link to file online here.
Once the initial BOI report is filed, both new and existing companies will have to file updates within 30 days of any change in the BOI or reporting company information.
The Rule contains potential civil and criminal penalties for willful failure to report or providing false information.
What is a FinCEN ID?
A FinCEN ID is a unique identifying number issued to a Reporting Company or to an individual (BO or CA) by FinCEN. A FinCEN ID is not required, however, a FinCEN ID can be reported instead of required information.
You can apply for an individual FinCEN ID here by creating an account. Keep in mind that the application will still require individuals to provide their full legal name, date of birth, address, unique identifying number and issuing jurisdiction from an acceptable identification document, and an image of the identification document.
Reporting companies may request a FinCEN identifier by checking a box on the beneficial ownership information report upon submission. After the reporting company submits the report, the company will immediately receive a unique FinCEN identifier.
Consult with Corporate Counsel for Questions
Beneficial ownership reporting is a relatively recent requirement for employers. For a legal consult with one of our Corporate Representation attorneys regarding your beneficial ownership and other regulatory requirements, contact our office at 703-535-7809 or info@moorechristoff.com
