Client Question: Beneficial Ownership Interest Reporting Requirements

April 25, 2024

At the end of 2023, I saw a mention of new regulation in a newsletter from a law firm that noted an upcoming reporting requirement for various companies (including LLCs and corporations). As a member of two LLCs, I looked into this more to see if it applied. And sure enough, there was a requirement for me to complete the filing.

Given that I myself had not heard much about this new rule prior to reading this article (and given the steep penalties for non-compliance (see below)), I have been talking with clients about the requirement to ensure any with LLCs (or other business types) stay in compliance. Here is some high-level guidance but as always, please work with your tax and legal advisors to confirm your requirements and to complete any required filings.

What is the regulation triggering the reporting requirement?

The Corporate Transparency Act (CTA) is the regulation triggering these new reporting requirements. While the CTA was enacted in 2021 by Congress (as part of its ongoing efforts to curb money laundering), the reporting requirement had been continually delayed. However, it took effect as of January 1, 2024 and introduces reporting requirements for new and existing companies formed or registered in the U.S., including corporations, partnerships, and limited liability companies.

What are the reporting requirements?

Unless an exemption applies, companies are required to file a Beneficial Ownership Interest (BOI) report that discloses information to the Financial Crimes Enforcement Network (FinCEN), a branch of the U.S. Department of the Treasury. There are 23 exemptions, which can be found here

If you do not qualify for an exemption, you must complete the filing with FINCEN

What is this information going to be used for and is it secure?

The CTA is authorizing FinCEN to collect this information and disclose it to authorized government authorities and financial institutions to help prevent money laundering, terrorist financing, corruption, tax fraud, and other illicit activity.

The CTA imposes strict confidentiality, security, and access restrictions on the data FinCEN collects. The information reported to FinCEN will not be accessible to the public and is not subject to the Freedom of Information Act requests.

FinCEN is required to maintain the information until five years after the reporting company terminates or is otherwise dissolved.

What is the deadline for compliance?

The due date for the initial report depends on when the company was created. Here are the deadlines

  • Companies created before January 1, 2024: no later than January 1, 2025.
  • Companies created on or after January 1, 2024: the initial report is due within 90 calendar days of the date the company is created

After the initial report, if anything changes (new owners, company is disbanded, etc), an updated report must be filed in 30 days

How do I file?

You can file online on FinCEN’s website

What are the penalties for non-compliance?

The penalties are rather severe. Both individuals and reporting companies are subject to civil and criminal penalties for failure to comply with their obligations under the CTA, which may include a fine of up to $500 for each day the violation continues, imprisonment for up to two years, or both.

Where can I find more information?

Our law firm Godfrey & Kahn has put together a full resource center which may be found here. There is also a considerable amount of information on the FinCEN BOI website. And as noted above, the best practice is to consult with your tax and legal advisors to ensure you are in compliance for your own specific situation.

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