On March 24, 2023 the Financial Crimes Enforcement Network (FinCEN) published guidance materials to aid the public in understanding upcoming beneficial ownership information (BOI) reporting requirements taking effect on January 1, 2024. The new regulations require many corporations, limited liability companies, and other entities created in or registered to do business in the United States to report information about their beneficial owners—the persons who ultimately own or control the company. The report is to FinCEN.

Very few U.S. states or territories require companies to disclose information about their beneficial owners—the individuals who ultimately (perhaps indirectly) own or control companies. This lack of transparency allows criminals, corrupt officials, and other bad actors to hide their identities and launder illicit funds through the United States using shell and front companies. This criminal activity in turn hurts ordinary Americans because the lack of transparency results in an uneven playing field for honest and legitimate U.S. businesses. The inaccessibility of beneficial ownership information also hampers law enforcement in tracking and prosecuting criminal activity.

In 2021, Congress, with bipartisan support, enacted the Corporate Transparency Act to address this problem. The Corporate Transparency Act requires certain types of U.S. and foreign entities to report information about their beneficial owners to the Treasury Department’s Financial Crimes Enforcement Network, commonly known as FinCEN. FinCEN is responsible for safeguarding the U.S. financial system from illicit use. Subject to strict safeguards and controls, FinCEN will disclose the reported beneficial ownership information to certain authorized government authorities, financial institutions, and other authorized users.

The vast majority of companies will be subject to the new reporting requirement, but several types of entities are exempt from the new reporting requirement. For each individual who exercises substantial control over the company, or who owns or controls at least 25 percent of the company, the company will need to report the individual’s: (1) legal name; (2) birthdate; (3) address (in most cases, a home address); and (4) an identifying number from a driver’s license, passport, or other approved document for each individual, as well as an image of the document from which the number is taken.

Reports are due by January 1, 2025 for companies created or registered to do business in the United States before January 1, 2024. For a company created or registered on or after January 1, 2024, reports due within 30 calendar days after receiving actual or public notice that the creation or registration of the reporting company is effective. This 30-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. Each reporting company will need to also provide some readily available information: (1) its legal name and any trade name or d/b/a; (2) its address; (3) the jurisdiction in which it was formed or first registered, depending on whether it’s a U.S. or foreign company; and (4) its Taxpayer Identification Number (TIN). FinCEN will begin accepting beneficial ownership information reports on January 1, 2024. Beneficial ownership information reports will not be accepted before then.

If a reporting company is created or registered on or after January 1, 2024, the reporting company will also need to report information about its company applicants. Up to two individuals qualify as company applicants: (i) the individual who directly files the document that creates, or first registers, the reporting company; and (ii) the individual that is primarily responsible for directing or controlling the filing of the relevant document. No reporting company will have more than two company applicants. If only one person was involved in filing the relevant document, then only that person should be reported as a company applicant.

For each individual who is a beneficial owner or a company applicant, a reporting company will have to report: the individual’s name, date of birth, address, a unique identifying number from an acceptable identification document, and the name of the state or jurisdiction that issued the identification document. For a beneficial owner, the reporting company must report the residential street address. For a company applicant, the reporting company must report the individual’s residential street address. However, if an individual engages in the business of corporate formation (e.g., as an attorney or corporate formation agent) and files the formation or registration document in the course of that business, then the reporting company must report the current street address of the company applicant’s business.

Only reporting companies formed or registered on or after January 1, 2024 will have to report their company applicants. Companies created or registered before January 1, 2024 do not have to report their company applicants.

Additional information and resources available at: www.fincen.gov/boi.

Several types of entities are exempt from the new reporting requirement. If unsure whether an organization fits any of the exceptions, consult an attorney.

Entities exempt from being considered a “reporting entity” for the new FinCEN beneficial ownership information reporting requirements:

1. Securities reporting issuers;

2. Governmental authorities; (any entity that is established under the laws of the United States, an Indian tribe, a State, or a political subdivision of a State, or under an interstate compact between two or more States, and exercises governmental authority on behalf of the United States or any such Indian tribe, State, or political subdivision);

3. Banks, credit unions, depository institution holding companies;

4. Money transmitting businesses;

5. Brokers or dealers in securities;

6. Securities exchanges or clearing agencies;

7. Certain other Exchange Act registered entities;

8. Investment companies or investment adviser companies;

9. Venture capital fund advisers;

10. Insurance companies;

11. State-licensed insurance producers (any entity that is an insurance producer that is authorized by a State and subject to supervision by the insurance commissioner or a similar official or agency of a State, and has an operating presence at a physical office within the United States);

12. Commodity Exchange Act registered entities;

13. Accounting firms;

14. Public utilities;

15. Financial market utilities;

16. Pooled investment vehicles;

17. Tax-exempt entities;

18. Entities assisting a tax-exempt entity;

19. Large operating company (any entity that employs more than 20 full time employees in the United States, has an operating presence at a physical office within the United States, and filed a Federal income tax or information return in the United States for the previous year demonstrating more than $5,000,000 in gross receipts or sales);

20. Subsidiaries of certain exempt entities (1, 2, 3, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 17, 18, or 19 set forth above); and

21. Inactive entities.