FinCEN Beneficial Ownership Reporting
The Corporate Transparency Act from 2021 (CTA) created new reporting requirements that will impact many businesses. Certain companies will need to disclose their beneficial owners through filings with the Financial Crimes Enforcement Network (FinCEN) beginning on January 1, 2024. The report will be filed through FinCEN’s website (https://www.fincen.gov/boi).
Who is required to file?
All reporting companies must file unless an exception applies. A reporting company is any entity that was created by filing a document with the Secretary of State for U.S. entities. Foreign entities that registered to do business in the U.S. may also be required to file. This includes entities structured as a corporation, LLC, LP, LLP, or LLLP, among others.
What are the exceptions to filing?
There are 23 exceptions to the filing requirement. One of the most important is the exception for large operating companies with a U.S. presence. For this exception to apply the company must have more than 20 full-time employees, maintain an operating presence at a physical office in the U.S., and file a U.S. income tax return for the previous year showing at least $5M of gross receipts.
Who is a beneficial owner?
Once a company has determined if it is required to file with FinCEN, it must determine who its beneficial owners are. A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control of the entity, or (2) owns or controls at least 25% of the reporting company.
What information must be reported?
Reporting companies must provide their full legal name, address, jurisdiction of formation or registration, and taxpayer identification number. In addition, the entity must provide information on all beneficial owners, including the individual’s full legal name, date of birth, address, unique identifying number from an acceptable identification document (i.e. passport or state-issued driver’s license or ID), and a scanned copy of the identification document.
What is the due date for filing the beneficial ownership information report with FinCEN?
The due date of the initial report depends on when the entity was created. A reporting entity created before January 1, 2024 will have until January 1, 2025 to file its initial beneficial ownership information report. A reporting entity created after January 1, 2024 needs to file its report 90 calendar days after creation. Starting in 2025, entities will need to file the initial report within 30 days of creation.
Updated reports are also required if any of the reported information changes. Updated reports must be filed within 30 calendar days after a change occurs.
What resources are available regarding these requirements?
FinCEN released a Frequently Asked Questions page at https://www.fincen.gov/boi-faqs which provides answers to the common questions regarding this new reporting.
CTA does not involve the Internal Revenue Service. Copeland Buhl cannot advise or assist clients regarding their FinCEN obligations. Instead, we recommend clients look towards their legal counsel for further advice.