On 3/24/23, FinCEN issued its first set of guidance materials to aid the public in understanding upcoming beneficial ownership information (BOI) reporting requirements taking effect on January 1, 2024. BOI refers to identifying information about the individuals who directly or indirectly own or control a company. BOI reporting information reporting will be done directly to FinCEN electronically through a secure filing system available via FinCEN’s website (system still under development).
The first set of guidance materials come at an appropriate time given that on 9/29/22 FinCEN issued the very anticipated Final Rule establishing a beneficial ownership information reporting requirement, pursuant to the bipartisan Corporate Transparency Act (CTA). The Final Rule requires most corporations, limited liability companies, and other entities created in or registered to do business in the United States to report information about their beneficial ownership. The BOI reporting provisions of the CTA are designed to protect the US financial system from illicit use and impede malign actors from abusing legal entities, including shell companies, to conceal proceeds of corrupt/criminal acts. Reporting companies (domestic and foreign) ought to make sure that they will be ready to comply with the Final Rule by its effective date of January 1, 2024, to identify the beneficial owners of an entity and the company applicants of an entity. New resources added to FinCEN’s BOI reporting webpage are:
- Beneficial Ownership Reporting – Key questions (March 24, 2023)
- Beneficial Ownership Reporting – Reporting Dates (March 24, 2023)
- Frequently Asked Questions (March 24, 2023)
- Short Introductory Video (March 24, 2023)
- Informational Video: Beneficial Ownership Reporting (March 24, 2023)
Here is a summary what you need to know about BOI
There are two types of Reporting Companies:
- Domestic company: a corporation, limited liability company, or any other entity created by the filing of a document with a secretary of state or similar office under the law of a state or Indian tribe.
- Foreign company: a corporation, limited liability company, or other entity formed under the law of a foreign country and that is registered to do business in any state or tribal jurisdiction.
Reporting Companies include:
Limited liability partnerships, business trusts, and most limited partnerships, in addition to corporations and LLCs (entities generally created by a filing with a secretary of state or similar office).
There are 23 types of entities that are exempt from the BOI requirement:
- Certain types of securities reporting issuers
- A U.S. governmental authority
- Certain types of banks
- Federal or state credit unions as defined in section 101 of the Federal Credit Union Act
- Bank holding company as defined in section 2 of the Bank Holding Company Act of 1956, or any savings and loan holding company as defined in section 10(a) of the Homeowners’ Loan Act
- Certain types of money transmitting or money services businesses
- Any broker or dealer, as defined in section 3 of the Securities Exchange Act of 1934, that is registered under section 15 of that Act (15 U.S.C. 78o)
- Securities exchanges or clearing agencies as defined in section 3 of the Securities Exchange Act of 1934, and that is registered under sections 6 or 17A of that Act
- Certain other types of entities registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934
- Certain types of investment companies as defined in section 3 of the Investment Company Act of 1940, or investment advisers as defined in section 202 of the Investment Advisers Act of 1940
- Certain types of venture capital fund advisers
- Insurance companies defined in section 2 of the Investment Company Act of 1940
- State-licensed insurance producers with an operating presence at a physical office within the United States, and authorized by a State, and subject to supervision by a State’s insurance commissioner or a similar official or agency
- Commodity Exchange Act registered entities
- Any public accounting firm registered in accordance with section 102 of the Sarbanes-Oxley Act of 2002
- Certain types of regulated public utilities
- Any financial market utility designated by the Financial Stability Oversight Council under section 804 of the Payment, Clearing, and Settlement Supervision Act of 2010
- Certain pooled investment vehicles
- Certain types of tax-exempt entities
- Entities assisting a tax-exempt entity
- Large operating companies with at least 20 full-time employees, more than $5,000,000 in gross receipts or sales, and an operating presence at a physical office within the United States
- The subsidiaries of certain exempt entities
- Certain types of inactive entities that were in existence on or before January 1, 2020, the date the Corporate Transparency Act was enacted
A Beneficial Owner includes any individual who, directly or indirectly, either:
- exercises substantial control over a reporting company, or
- owns or controls at least 25 percent of the ownership interests of a reporting company
BOI that needs to be reported depends on when the company was created or registered:
- If a reporting company is created or registered on or after January 1, 2024, the reporting company will need to report information about itself, its beneficial owners, and its company applicants.
- If a reporting company was created or registered before January 1, 2024, the reporting company only needs to provide information about itself and its beneficial owners. The reporting company does not need to provide information about its company applicants.
The company applicant of a reporting company can be up to two individuals:
- the individual who directly files the document that creates, or first registers, the reporting company; and
- the individual that is primarily responsible for directing or controlling the filing of the relevant document.
The type of information that a reporting company will have to report about itself includes:
- Its legal name
- Any trade names, “doing business as” (d/b/a), or “trading as” (t/a) names
- The current street address of its principal place of business if that address is in the United States (for example, a domestic reporting company’s headquarters), or, for reporting companies whose principal place of business is outside the United States, the current address from which the company conducts business in the United States (for example, a foreign reporting company’s U.S. headquarters)
- Its jurisdiction of formation or registration
- Its Taxpayer Identification Number
The type of information that a reporting company will have to report about its beneficial owners and company applicants includes:
- The individual’s name, date of birth, and address
- A unique identifying number from an acceptable identification document
- The name of the state or jurisdiction that issued the identification document
FinCEN is authorized to disclose BOI in certain circumstances to six types of requesters:
- U.S. Federal agencies engaged in national security, intelligence, and law enforcement activities
- State, local, and Tribal law enforcement agencies with court authorization
- The U.S. Department of the Treasury
- Financial institutions using beneficial ownership information to conduct legally required customer due diligence, provided the financial institutions have their customer consent to retrieve the information
- Federal and state regulators assessing financial institutions for compliance with legally required customer due diligence obligations
- Foreign law enforcement agencies and certain other foreign authorities who submit qualifying requests for the information through a U.S. Federal agency
Will you be ready to comply with FinCEN’s BOI reporting requirements taking effect on January 1, 2024?
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