New Federal Reporting Requirement for Beneficial Ownership Information

Overview:

A new reporting requirement has gone into effect as of January 1, 2024, that will affect small entities operating in the US – including most corporations, LLC’s, and partnerships established by individuals for estate and financial planning purposes. Affected entities will be required to disclose their Beneficial Owners’ Information (“BOI”) to the Financial Crimes Enforcement Network (“FinCEN”).

The reporting requirements are not difficult, and the fines for not reporting are significant enough that most people will want to complete it rather than avoid it. This article provides answers to commonly asked questions along with links to FinCEN’s website for details on completing the reporting.

Which Business Entities are Affected?

Corporations, Partnerships, and LLCs formed in the US (and similar entities formed in other countries but with US assets or activities) must disclose the identities of “Beneficial Owners” which it defines as owners with 25% or greater stake in the entity and/or an owner with any stake who exerts meaningful entity control.

There are 23 types of entities who are exempt from this filing, and include publicly traded companies, non-profits, and inactive entities. However, few exemptions would apply to entities serving an estate or financial planning purpose.

View a full list of exempt companies on FinCEN’s website here.

When Do I Have to Report?

FinCEN began accepting reports on January 1, 2024. The reporting deadline corresponds with your entity’s created or registered date:

• Prior to January 1, 2024: existing entities have until the end of 2024 to disclose BOI.
• During 2024: BOI must be reported within 90 days after effectively receiving notice of your entity’s creation or registration (whichever is earlier).
• On or after January 1, 2025: BOI must be filed within 30 days after effectively receiving notice of your entity’s creation or registration.

If you have changes or updates to make on a previously filed BOI report, you must submit those changes within 30 days.

How Do I Complete the BOI Reporting Requirement?

You can submit beneficial ownership information electronically through FinCEN’s website here: www.fincen.gov/boi. Before applying, be sure to have a copy of your driver’s license or passport available. Start by creating a FinCEN ID, proceed to filing at FinCEN’s BOI E-Filing website (https://boiefiling.fincen.gov) and select “File BOIR.”

There is no fee associated with submitting your report to FinCEN.

Note: Please consider contacting your attorney before filing on your own. Few accounting and law firms are assisting with this filing requirement at this time, but it’s best to confirm you are all on the same page.

What Does FinCEN Do With this Information?

FinCEN’s mandate is to prevent financial crimes. To that end it provides BOI information to Federal, state, and foreign security and law enforcement entities, to financial institutions for their customer due diligence programs and to the government entities who regulate them, and to the US Treasury department.  Otherwise, the information should be protected.

Learn more about BOI information access and safeguards here.

Opposition

Several industry groups are challenging the BOI reporting requirement in court or seeking its suspension. On March 1, 2024 a district court in Alabama ruled the requirement exceeds US Constitutional limits, and said the government must stop enforcing the BOI reporting requirement against the plaintiffs – which means that one person and members of the National Small Business Association don’t have to report BOI at this time while additional hearings take place. It’s unclear how this and other challenges will be resolved, but until then reporting remains required for everyone else; before the end of 2024 for business entities formed in 2023 or earlier, within 90 days for entities formed in 2024.

Next Steps

• Determine which entities you have that must disclose their beneficial owners.
• Consider dissolving entities you’re not using to avoid filing unnecessary reports.
• For anyone with entities formed before 2024 hoping to avoid disclosing BOI keep a close watch on suspension developments and make a reporting decision later in the year; otherwise,
• Create user ID and password on the FinCEN site to disclose BOI as required.

Additional Resources

• Here’s a video of a lawyer explaining the new reporting requirement
• FinCEN FAQ’s
• Official FinCEN brochure
• FinCEN compliance guide