ATTENTION ALL BUSINESSES: NEW 2024 Beneficial Ownership Information Reporting Requirements

by Sandeep S. Chandi, Esq. and Amandeep S. Cheema, Esq. (Pasricha & Patel, LLC)

Introduction

The U.S. Department of the Treasury's Financial Crimes Enforcement Network (“FinCEN”) recently issued the final rule on the beneficial ownership information reporting requirements effective January 1, 2024 (the “Rule”). This comes as part of an effort to increase transparency and accountability in business operations.

This post will provide a summary of the rule, its applicability, and the filing requirements and deadlines.

Overview of the Final Rule

Effective January 1, 2024, the Rule requires most corporations, limited liability companies (LLCs), and similar entities to report their beneficial ownership information to FinCEN (a “BOI Report”). The Rule aims to prevent the misuse of companies for illicit activities such as money laundering and terrorism financing. The Rule represents a significant step towards enhancing transparency and ensuring legal accountability in the business sector.

Applicability of the Rule

The BOI Report requirements established by the Rule (the “Reporting Requirements”) apply to corporations, LLCs, and similar entities created within the United States. The Reporting Requirements also apply to foreign entities registered to do business in the U.S. In addition to the entity itself, the Reporting Requirements also apply to (1) the beneficial owners of the entity, and (2) the company applicants.

The following specific types of entities are exempt from the Reporting Requirements:

Securities reporting issuer
Governmental authority
Bank
Credit union
Depository institution holding company
Money service businesses
Broker or dealer in securities
Securities exchange or clearing agency
Other Exchange Act registered entity
Investment company or investment advisor
Venture capital fund adviser
Insurance company
State-licensed insurance producer
Commodity Exchange Act registered entity
Accounting firm
Public utility
Financial market utility
Pooled investment vehicle
Tax-exempt entity
Entity assisting a tax-exempt entity
Large operating company
Subsidiary of certain exempt entities
Inactive entity (see Small Entity Compliance Guide linked below for qualification criteria)

Filing Requirements and Deadlines

Entities required to report must provide information about each beneficial owner, including their full legal name, date of birth, current residential or business street address, and an identification number from an acceptable document. The filings must be completed in accordance with the following timelines:

Entities created before January 1, 2024 must file a BOI Report by January 1, 2025.
Entities created on or after January 1, 2024, but before January 1, 2025, must file a BOI Report within ninety (90) days of receiving notice from a secretary of state (or similar office) that the creation of the company is effective.
Entities created on or after January 1, 2025 must file a BOI Report within thirty (30) days of receiving notice from a secretary of state (or similar office) that the creation of the company is effective.

After the initial filing of a BOI Report, entities are required to update their information within one (1) year of any change in beneficial ownership.

Conclusion

The Reporting Requirements represent a significant shift in business transparency and accountability. It is crucial for affected entities to understand these requirements to ensure compliance. The final rule has lasting implications for corporations, LLCs, and similar entities, particularly around the reporting of beneficial ownership information.

Entities and beneficial owners should consult with their legal advisors to understand the full extent of the Rule and Reporting Requirements and how they may impact their operations.

Government Resources

The Small Entity Compliance Guide published by FinCEN can be found here: Small Entity Compliance Guide.

Additional guidance from FinCEN about the Rule and Reporting Requirements can be found here: FinCEN BOI Guidance.

Frequently Asked Questions can be found here: FAQs.