New Reporting Requirement for Beneficial Ownership Information: What You Need to Know

When do companies need to report their BOI to the FinCEN?

Registration requirements vary depending on the company's formation date. Companies must report their Beneficial Ownership Information (BOI) to FinCEN - through https://boiefiling.fincen.gov - as follows:

1. Companies existing before January 1, 2024, should have filed by January 1, 2025.
2. Companies established in 2024 have 90 days to file from the notice of formation.
3. Companies formed on or after January 1, 2025, must file within 30 days of receiving formation notice.

What companies have to report BOI to the FinCEN?

The BOI requirement applies to “reporting companies,” which include:

• domestic reporting companies: entities created by filing a document with a secretary of state or any similar federal office; and
• foreign reporting companies: entities created under foreign law that register to do business in the US through similar filings.

Are some companies exempt from the BOI reporting requirement?

The following 23 entities are exempt from the BOI reporting requirement:

1. securities reporting issuer;
2. governmental authority;
3. bank;
4. credit union;
5. depository institution holding company;
6. money services business;
7. broker or dealer in securities;
8. securities exchange or clearing agency;
9. other Exchange Act registered entity;
10. investment company or investment adviser;
11. venture capital fund adviser;
12. insurance company;
13. state-licensed insurance producer;
14. Commodity Exchange Act registered entity;
15. accounting firm;
16. public utility;
17. financial market utility;
18. pooled investment vehicle;
19. tax-exempt entity;
20. entity assisting a tax-exempt entity;
21. large operating company (with more than 20 full-time employees; more than USD 5 million in gross receipts or sales; and a physical office within the United States);
22. subsidiary of certain exempt entities; and
23. inactive entity.  

What is the definition of beneficial owners?

A beneficial owner of a reporting company is an individual who directly or indirectly either:

1. exercises “substantial control” over the reporting company; or
2. owns or controls at least 25% of its ownership interests.

What is substantial control?

An individual is said to be exercising substantial control if the individual:

• is a senior officer (e.g. president, general counsel, COO, CEO or any other officer who performs a similar function);
• has authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company;
• makes an “important decision” (i.e.: directs or significantly influences key business, financial, or structural decisions) for the reporting company; or
• has any other form of substantial control over the reporting company.

What information do reporting companies have to report?

Reporting companies formed or registered on - or after - January 1, 2024 must report their beneficial owners, and their company applicants. However, 23 types of entities, including publicly traded companies, non-profits, and certain large operating companies are exempt from this requirement.

Those established before January 2024 are only required to report information about themselves and their beneficial owners.

What information do reporting companies have to report about themselves?

A reporting company must report:

1. its legal name;
2. any trade names;
3. the current street address of its principal place of business in the United States (if foreign, the current address from which the company conducts business in the United States);
4. its jurisdiction of formation or registration; and
5. its Taxpayer Identification Number (TIN) (if none, a tax identification number issued by a foreign jurisdiction and the name of the jurisdiction).

A reporting company must specify if it is submitting an initial report, or a correction or an update of a previous report.

What information do reporting companies have to report about their beneficial owners?

For each beneficial owner, a reporting company must provide:

1. the name;
2. date of birth;
3. residential address; and
4. an identifying number from an acceptable identification document and the name of the issuing state or jurisdiction of identification document (together with an image of the identification document).

What information do reporting companies have to report about their company applicants?

For each company applicant, a reporting company has to provide:

1. the name;
2. date of birth;
3. residential address (or business address if the company applicant works in corporate formation, e.g. as an attorney or corporate formation agent); and
4. an identifying number from an acceptable identification document and the name of the issuing state or jurisdiction of identification document (together with an image of the identification document).

What identification documents are acceptable?

The only acceptable forms of identification are:

• a non-expired US driver’s license;
• a non-expired identification document issued by a US state or local government, or Indian Tribe;
• a non-expired US passport; or
• a non-expired foreign passport (only when an individual does not have one of the above).

Who is a company applicant?

A company can have up to two individuals qualify as company applicants:

1. the person who directly files the company's creation or registration document, and
2. if multiple people are involved, the person primarily responsible for directing or controlling the filing.

Are there penalties for violating the BOI reporting requirement?

A person who willfully fails to comply with the beneficial owner information reporting requirement faces civil penalties of up to USD 500 daily until the resolved, and criminal penalties, including imprisonment of up to 2 years and a fine of up to USD 10,000.

Potential violations include:

1. willfully filing false BOI;
2. willfully failing to file a BOI report; or
3. willfully failing to correct or update previously reported BOI.

Both individuals and corporate entities can be held liable for willful violations of the BOI reporting requirement.

What is the FinCEN?

The FinCEN (Financial Crimes Enforcement Network) is a federal agency established by the Treasury Department to provide a government-wide multisource financial intelligence and analysis network.