Beneficial Ownership Reporting
Beginning in 2024, newly formed corporations, limited liability companies (LLCs), limited partnerships, and similar entities are required to file a report with Financial Crimes Enforcement Network (FinCEN), a branch of the U.S. Department of Treasury, disclosing specific information about their "beneficial owners." For entities existing before January 1, 2024, the reporting obligation kicks in on January 1, 2025.
Beneficial owners are defined as individuals with over 25% ownership interests or those exercising substantial control over the reporting company. This definition extends beyond significant shareholders to include senior officers and individuals involved in critical business decisions.
For entities formed after 2023, additional information about "company applicants" – those filing formation/registration papers and directing or controlling the filing – must also be provided.
The required information for beneficial owners includes legal name, residential address, date of birth, and a unique identifier from a nonexpired passport, driver’s license, or state identification card. An image of these documents must be submitted to FinCEN for all beneficial owners.
While most entities have until January 1, 2025, to file these reports, those formed in 2024 and later must submit within 30 days of formation, with a proposed extension to 90 days for entities formed in 2024.
In case of any changes to reported information or the sale/transfer of beneficial ownership interests, entities must report these changes within 30 days or risk facing penalties.
The penalties for non-compliance or the willful failure to update information in a timely manner are substantial, ranging from fines of up to $500 per day to potential criminal charges with fines of up to $10,000 and/or two years imprisonment. These penalties apply to the beneficial owner, the entity itself, and the person responsible for completing the report.
Filing for most entities will be simple, straightforward, and easily accomplished for most business owners with minimal cost and effort. That said, those with multiple entities and entities with multiple partners, shareholders, or complex capital structures may need to enlist the help of attorneys and other advisors to ensure adequate reporting.
Please reach out at your earliest convenience to one of our professionals if you have any questions about BOI reporting, we’d be happy to discuss.
