03/06/2024
The following notice was sent to all current and former corporate formation clients, but we want to make sure the public is informed as well.
There is a new law which is in effect starting this year requiring certain information about ownership of legal entities (like LLCs and corporations) to be reported to an agency of the Department of Treasury called the Financial Crimes Enforcement Network (“FinCEN”). In 2021, Congress passed the Corporate Transparency Act to restrain bad actors from using multiple or layered “shell” corporations and other entities to obscure fraudulent schemes. The goal of the legislation is to prevent these activities by requiring personal information of certain “beneficial owners” to be identified and associated with most legal entities operating in the United States. Sole proprietorships and general partnerships are not currently included in these requirements.
Beneficial owners include those persons who “exercise substantial control” over a company or owners of 25% or more of the ownership interests in a company. (The rules also apply to owners of legal entities that own other legal entities). Generally, the information to be reported will include each beneficial owner’s legal name, date of birth, residential address, and the identification number of an acceptable ID, such as a passport or driver’s license. An image of the ID will also need to be included. This information will not be publicly available but will be available to federal, state, and local law enforcement agencies upon need-to-know. Financial institutions (e.g., banks) may also access this information upon authorization from the reporting entity (i.e., you).
For existing companies created or registered before January 1, 2024, filing must be done by January 1, 2025. For companies created after January 1, 2024, filing must be received by FinCEN within 30 days of the registration of the company with the applicable Secretary of State. There will be no fee for submitting a report. There are both civil and criminal penalties for failure to comply with the CTA, which are quite aggressive. Though there is no annual requirement to submit a report, an updated report will need to be filed if there is any change in required information within 30 days after that change. “Any change” could be simply a change of address of a beneficial owner; it is defined broadly.
I encourage you to look at the FAQ that has been posted by FinCEN and continues to be updated here: https://www.fincen.gov/boi-faqs
Based on our own experience in filing our Beneficial Ownership Information Report (BOIR) application, we believe that in most cases, this is something that most people will be able to do without professional assistance. You will, however, need to be sure to have a few things readily accessible to you as you proceed through the application portal, notably, (a) a form of ID (like a driver’s license or a passport) for each beneficial individual owner of your entity (generally someone who has equal to or greater than 25% ownership in your entity – whether directly or through some other entity), (b) the residential addresses and dates of birth for all such individuals, and (c) the EIN of the organization for which you are filing the application.
The portal can be found here: https://boiefiling.fincen.gov/ There is no filing fee. Please engage a professional if you are unsure whether these requirements apply to you.
