Starting on January 1, 2024, the US Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) will require the reporting of beneficial ownership information (“BOI”) under the Corporate Transparency Act (the “CTA”) for many domestic and foreign legal entities, including corporations, limited liability companies, partnerships, and any entity whose legal existence requires application or registration.
Domestic legal entities are those created under the laws of one of the US states or an Indian tribe. Foreign legal entities are those formed under the laws of a country other than the US and registered to do business in any US state or tribal jurisdiction.
Beneficial ownership is any individual who directly or indirectly either exercises substantial control over the entity (e.g., management, service as a senior officer of the reporting legal entity, etc.) or owns or controls twenty-five percent or more of the ownership interests in the entity. Indirect ownership requires looking through intermediate entities until an individual is identified.
Entities created after December 31, 2023 and with changes to previously reported information must file their BOI reports within 30 days of the formation, change or discovery of inaccuracy. Entities created before January 1, 2024 must file their first BOI report by January 1, 2025.
Each entity must report entity-related information (legal name, business address, state or tribal jurisdiction of formation, and IRS taxpayer identification number) and personal information of its beneficial owners [name, birthdate, address and an image of a government issued document (US passport or state driver’s license)]. In addition, company applicants (e.g., individuals who were involved in the creation of the entity) must be reported by domestic reporting entities created on or after January 1, 2024 and foreign reporting entities first registered to do business in the US on or after January 1, 2024. The reporting is expected to be through electronic means via FinCEN’s website, but the system is still in development and the specific procedures are not known at this time.
The reported information is not public information and is available only to federal government agencies, state and local governments with proper court authorizations, financial institutions with the consent of clients, etc.
Penalties for willful violations of the CTA may result in material monetary penalties and can include up to two years of imprisonment.