Who is required to report?
Companies that are required to file these reports are called “reporting companies.” These are corporations, limited liability companies, and any other entities that are formed by filing a document with the secretary of state or similar office of any state (as well as any foreign entities that have registered to do business in the United States by filing a document with one of those offices). There are exceptions, such as publicly traded companies, companies with annual gross receipts exceeding $5 million that have more than 20 full-time U.S. employees and a physical office in the United States, and companies already subject to Federal government oversight (e.g., banks).
Who are “beneficial owners”?
The Act requires reporting companies to provide information relating to their “beneficial owners” (generally, individuals owning 25% or more) and persons who substantially control the business (generally, individuals holding significant decision-making authority). Senior officers (mainly at the “C-suite” level) are included in the reporting requirement, as are individuals who have the authority to appoint or remove certain officers or a majority of the board of directors/board of managers. There are certain exceptions to this definition, such as custodians and certain employees.
What information must be reported about the company?
A reporting company must report its legal name and all names under which it does business (trade names, DBAs), the street address of its principal place of business, the jurisdiction of its formation, and its EIN.
What information must be reported about beneficial owners?
For each beneficial owner, the company must report: (i) the individual’s name; (ii) date of birth; (iii) residential address; and (iv) unique identifying number from the individual’s passport, state driver’s license, or identification document issued by a state, local government, or tribe (together with an image of the identification document used to obtain the identifying number). Individuals who are beneficial owners of multiple reporting companies should consider applying for a FinCEN identifier, which can be used in place of the items described above for subsequent reports. FinCEN identifiers are also available to the reporting company itself to streamline future reporting.
Where does the report get filed?
This information must be entered on a portal maintained by the Financial Crimes Enforcement Network (“FinCEN”), an agency of the U.S. Department of Treasury. This portal will not be available until January 1, 2024, so you will not be able to get an early start on compliance. There is no filing fee.
Who has access to the reported information?
FinCEN is responsible for securing the reported information. Access to this database will be limited to law enforcement agencies and, with the company’s consent, banks and other institutional lenders.
What happens to non-compliers?
Penalties for non-compliance are severe. A reporting company that willfully fails to report or update information or willfully provides or attempts to provide false or fraudulent information could incur civil penalties of up to $500 for each day that the violation continues and/or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required BOI report may be held accountable for that failure. A beneficial owner who willfully causes a reporting company to be non-compliant may also face civil and criminal penalties.
FinCEN has published a guide for small businesses to help with their compliance efforts: click HERE.
A more succinct FAQ resource can be found HERE.
For more information on the CTA, or other legal issues, contact Joanne Murray . To learn more about Antheil Maslow & MacMinn's Business Law Services, visit our Business & Finance pages at ammlaw.com. To print click Client Alert .