Beneficial ownership information reporting requirements are here. Here's what you need to know.

Beneficial Ownership Information Reporting

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Beneficial Ownership Information Reporting Overview

Starting in January 2024, the majority of legal entities in the United States must submit its Beneficial Ownership Information to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). This applies to newly formed entities as well as preexisting entities. This requirement is a part of the Corporate Transparency Act and is designed to prevent or stop financial crimes.

Our Approach

At Incserv, our team of experts can help entities satisfy Beneficial Ownership Information Reporting requirements and achieve compliance. We work with entities to understand the Corporate Transparency Act, collect the required reporting information and submit filings.

Beneficial Owner

A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over the reporting company, or (2) owns or controls at least 25% of the reporting company’s ownership interests.

Reporting Companies and Applicants

There are two types of reporting companies:

Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.

The beneficial ownership information reporting applicant is the individual(s) or company that is “primarily responsible for directing or controlling the filing.” Only reporting companies created or registered on or after January 1, 2024, will need to report their company applicants. A company that must report its company applicants will have only up to two individuals who could qualify as company applicants:

The individual who directly files the document that creates or registers the company
If more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing

Filing Requirements

Reporting entities will be required to supply the following information:

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 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 Employer Identification Number (EIN) or Taxpayer Identification Number.

Beneficial owners and applicants will be required to report the following information:

The individual’s name
Date of birth
Residential address
An identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of identification document
Image of the identifying document

Important Dates and Deadlines

According to FinCEN, “A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial beneficial ownership information report.

A reporting company created or registered on or after January 1, 2024, will have 90 days to file its initial beneficial ownership information report. This 90-day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.”

Updated filings must be submitted within 30 days of any change to the information. If a report requires correction, it must be filed within 30 days from when an error or errors are discovered.

How to File

The form to report beneficial ownership information is not yet available. Once available, information about the form will be posted on FinCEN’s beneficial ownership information webpage.

Frequently Asked Questions

What is the Corporate Transparency Act?

The Corporate Transparency Act was signed into law in 2021 in an effort to help law enforcement identify corporate shells and curtail their use amongst beneficial owners of corporate entities. At a high level, the law requires “most corporations, limited liability companies, and other entities created in or registered to do business in the United States” to file a statement of beneficial ownership with FinCEN, “identifying the persons who ultimately own or control the company.” (fincen.gov)

What is FinCEN?

FinCEN, or the Financial Crimes Enforcement Network, is a department within the U.S. Treasury. The department collects and analyzes information about financial transactions in order to combat domestic and international money laundering, terrorist financing, and other financial crimes.

What is a beneficial owner?

Are any entities exempt from filing beneficial ownership information?

Yes. There are 23 entity types that are exempt from beneficial ownership information reporting, including publicly traded companies meeting specified requirements, many nonprofits, and certain large operating companies. A complete list of exempt entity types is available here.

Are there ongoing requirements to maintain compliance?

No, unless the beneficial owner information or reporting entity information changes.

Are there penalties for failure to report?

Yes, and they are quite substantial. The Small Entity Compliance Guide states that “the willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required BOI report may be held accountable for that failure.”