FinCEN’s Beneficial Ownership Reporting Rule is Now in Effect as of January 1, 2024: Recap and Recent Developments

Key Points:

  • Beneficial ownership reporting requirements under the Corporate Transparency Act (the “CTA”) took effect on January 1 of this year.
  • Certain entities created or registered to do business in the United States are now required to disclose to the federal government personal information about their beneficial owners, senior officers, and other control persons, unless exempt.
  • For this new reporting requirement, the federal government places the obligation on the reporting company itself. Because of that, and because of the need to collect and compile personal information, as above, we are not able to undertake this reporting on behalf of our clients unless specifically requested and agreed to in writing.
  • This update describes the current status of CTA implementation efforts and provides links to in-depth summaries and other resources.

In connection with the Corporate Transparency Act, codified at 31 U.S.C. § 5336, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) has promulgated new Beneficial Ownership Information Reporting Requirements at 31 C.F.R. § 1010.380. These regulations went into effect January 1, 2024, and require certain entities (referred to as “reporting companies”) to report identifying information to FinCEN concerning two categories of individuals: (i) those who directly or indirectly own or control the reporting company (known as “beneficial owners”); and (ii) those who directly file or are primarily responsible for filing documents that create or register the reporting company (known as “company applicants”). Readers are encouraged to visit the FinCEN website, where numerous guidance documents—including a lengthy and detailed Small Entity Compliance Guide—can be found.

With some exceptions, a “reporting company” for purposes of Beneficial Ownership Information (“BOI”) reporting is every corporation, limited liability company, or any entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indiana tribe. FinCEN expects the BOI reporting to include, with specific exemptions, corporations, limited liability companies (LLCs), limited liability partnerships (LLPs), business trusts, and most limited partnerships (LPs). There are exemptions for certain types of companies including “large operating companies”, certain “tax exempt” organizations, and “inactive” (as defined by FinCEN) companies that were in existence before January 1, 2020. Of note, companies which recently dissolved or became inactive may nevertheless have an obligation to provide BOI to FinCEN. The FinCEN guidance materials linked above contain further details regarding these exemptions.

For this new reporting requirement, the federal government places the obligation on the reporting company itself. The reporting requires the collection and uploading of certain identifying information (e.g., drivers’ license or passport) with respect to beneficial owners and company applicants, and so we are generally not equipped to take care of the initial report. Because of that, we will not be undertaking this reporting unless specifically requested and agreed to in writing. It is our expectation, though, that our clients will be able to navigate this process without our assistance. As with FinCEN’s guidance documents, the BOI reporting portal can be found on the FinCEN website.

Under these new regulations, a reporting company that existed prior to January 1, 2024, will have one year to make its initial report (i.e., by January 1, 2025), while companies that were or are formed (or that register or have registered to business) on or after January 1, 2024, but prior to January 1, 2025, have a ninety-day window in which to make an initial report. Beginning on January 1, 2025, newly formed or registered companies will have only a thirty-day window for the initial report.

Please be advised that a willful failure to file a report, or a willful provision or attempt at provision of false or fraudulent BOI, may result in civil and criminal penalties.

Access to the information that is reported is strictly constrained by the Corporate Transparency Act, and FinCEN is primarily authorized to disclose BOI in limited circumstances relating to national security, intelligence, or law enforcement. Importantly, the proposed rule does not include a mechanism for compelling disclosure of BOI in connection with private litigation.

In closing, we encourage you to review the linked resources published by FinCEN. As you review, and if you should have any questions or concerns regarding this regulation and its effect on you or your company, please contact any of our Business Services attorneys. While we share FinCEN’s expectation that the reporting company will be able to compile this information and file the necessary reports without legal or other expertise, we expect you may have questions regarding this new filing requirement or in developing your company’s BOI report.

Stuart & Branigin was founded in 1878 in Lafayette, Indiana. Our experienced and knowledgeable lawyers provide trusted counsel to local, regional and national clients. Our firm is composed of five practice groups, Corporate and Non-Profit, Litigation, Personal Injury, Private Client Services, and Transportation.