Update: On January 1, 2024 the Corporate Transparency Act, a bipartisan federal law, will come into force obligating most companies created in the US or foreign companies doing business in the US with mandatory filings.

The law obligates to file a comprehensive report on who the owners are and other relevant key facts about the company. While the new law intends to battle money laundering, corruption and tax evasion – providing law enforcement with critical information on the perpetrators is sensible – everyday businesses are put at the same risk of non-compliance: A violation can result in penalties up to US$10,000 or a prison sentence depending on the frequency of the violations. Subject to the fine can be the entity or the owner, depending on whether a deliberately false fact has been submitted or the information has been omitted.

Given the gravity and urgency of this, this article sheds light on what you have to file, with whom you have to file, when you have to file, and what you can do if you are late with your filing.

Who Has to Report its BOI to FinCEN? And Who Does Not Have to File?

There are two different companies that are required to file this report: Domestic reporting companies, such being corporations, limited liability companies and any other entities; and Foreign reporting companies formed under the law of a foreign country that have registered to do business in the United States.

There are 23 types of entities that are exempt from the reporting requirements. These include mainly nonprofit organizations, publicly traded companies meeting specified requirements and certain large operating companies as well as banks and other money services businesses. There are also some subsidiaries of certain types of entities that are exempt from the reporting requirements. For a complete list of the exemptions and a checklist which helps you determine if your company is exempt visit FinCEN’s Small Entity Compliance Guide.

What Kind of Information Has to be Reported?

The reporting company will have to provide certain key information about itself, its beneficial owners, and in some cases, the individuals that formed them (so called “company applicants”).

The reporting company will have to provide the following information about itself:

• Legal name and any trade name or DBA;
• Operating Address;
• The jurisdiction in which it was formed or first registered depending (if foreign entity);
• Taxpayer identification number.

For each of the reporting company’s beneficial owners and company applicants, the reporting company will need to provide the individual’s:

• Legal name;
• Birthdate;
• Address (in most cases the home address);
• An identifying number (drivers license, passport, other official document);
• An image of the approved document for each individual.

The beneficial owner is any individual who exercises substantial control over the reporting company, or who owns or controls at least 25 percent of the reporting company.

An exception is made for company applicants: These do not have to be reported or every company created or registered before January 1, 2024, the information on the beneficial owner is sufficient.

When Does it Have to be Reported?

The FinCEN will begin to accept filings on January 1, 2024. The deadlines for the filings depend on when the respective company was created or first registered.

• Creation or registration prior to January 1, 2024: For every company which has been created or first registered before January 1, 2024, the deadline for the initial filings will be January 1, 2025. The majority of companies will therefore have one year for the first filings.
• Creation or registration after January 1, 2024: For every company which will be created or first registered on or after January 1, 2024 and before January 1, 2025 the initial beneficial ownership information report must be filed within 90 calendar days after receiving actual or public notice that its creation or registration is effective.
• Creation or registration after January 1, 2025: Every company which will be created or first registered after January 1, 2025, the deadline for the initial filings will be 30 calendar days from receiving actual or public notice that its creation or registration is effective.
• Changes to your information after filing: If there is any change to the required information about your company or its beneficial owners, your company must file an updated report no later than 30 days after the date of change. The same deadline applies if the company applicant notices that the report has any inaccuracies.

How Can You File Your BOI Report?

Reports will be filed electronically through FinCEN’s own secure filing system. BOI reports will be stored in a secure database and will be shared only with authorized users for purposes specified by law.

What Can You Expect If You Do Not Meet Your Reporting Requirements?

The reporting itself has no fee. However, if you don’t meet the reporting requirements in the respective timeframe you may have to pay civil or criminal penalties of up to USD 10,000 or up to two years in prison!

Of course, these are only the maximum penalties. If you notice that you missed some of the deadlines or you notice that you provided some inaccurate information, to avoid penalties, you can submit a voluntary report correcting the information within 90 days of the deadline for the original report.

For more information visit the website of the FinCEN and especially the FAQ-website.

Author: Nicolas Kalveram and Daniel Koburger

Release: 12/11/2023