Effective January 1, 2024, the Corporate Transparency Act (CTA) requires most business entities to file an initial report with the Financial Crimes Enforcement Network (FinCEN) to disclose the entity’s beneficial owners (a “BOI Report”). Entities that existed before January 1, 2024, have until January 1, 2025, to comply.
What does the new rule require?
The rule requires reporting companies to file reports with FinCEN that identify two categories of individuals: (1) the beneficial owners of the entity; and (2) the company applicants of the entity. Beneficial ownership information reporting is not an annual requirement. A report only needs to be submitted once, unless the filer needs to update or correct information.
Is my company a “reporting company”?
The rule identifies two types of reporting companies: domestic and foreign. A domestic reporting company is a corporation, limited liability company (LLC), or any entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe. A foreign reporting company is a corporation, LLC, or other entity formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office. Under the rule, and in keeping with the CTA, twenty-three types of entities are exempt from the definition of “reporting company.”
What information must be provided?
Generally, reporting companies must provide four pieces of information about each beneficial owner:
- date of birth;
- address; and
- the identifying number and issuer from either a non-expired U.S. driver’s license, a non-expired U.S. passport, or a non-expired identification document issued by a State (including a U.S. territory or possession), local government, or Indian tribe. If none of those documents exist, a non-expired foreign passport can be used. An image of the document must also be submitted.
The company must also submit certain information about itself, such as its name(s) and address. In addition, reporting companies created on or after January 1, 2024, are required to submit information about the individuals who formed the company (“company applicants”).
What’s the purpose of the new rule?
The rule will enhance the ability of FinCEN and other agencies to protect U.S. national security and the U.S. financial system from illicit use and provide essential information to national security, intelligence, and law enforcement agencies; state, local, and Tribal officials; and financial institutions to help prevent drug traffickers, fraudsters, corrupt actors such as oligarchs, and proliferators from laundering or hiding money and other assets in the United States. Essentially, the goal is to eliminate the use of “shell” companies to hide illicit activities.
Does it cost anything to file?
No. FinCEN has created a website that is now live for free electronic filing: https://boiefiling.fincen.gov/
See the Small Entity Compliance Guide for more information: https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf