New Reporting Obligation for Certain Businesses: The Beneficial Ownership Information Reporting Rule
The Beneficial Ownership Information Reporting Rule, introduced by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), marks a significant shift in the transparency requirements for companies in the United States. This rule, stemming from the Corporate Transparency Act (CTA) enacted in 2021, aims to combat financial crimes like money laundering and tax evasion by requiring detailed reporting of beneficial ownership information.
What is the Beneficial Ownership Information Reporting Rule?
The rule mandates certain U.S. and foreign companies to report specific information about their beneficial owners to FinCEN. A beneficial owner is defined as individuals who directly or indirectly own or control a company.
Who is Affected?
The rule applies to "reporting companies," which include both domestic entities formed in the U.S. and foreign entities registered to do business in the U.S. However, there are 23 categories of exemptions, including large operating companies, public companies, and regulated businesses like banks and insurance companies.
Key Reporting Requirements
Reporting companies need to provide comprehensive information, including:
- Company Information: Legal name, trade or DBA names, principal business address, jurisdiction of formation, and Tax Identification Number (TIN).
- Beneficial Owner Information: Legal name, date of birth, residential address, and an identifying number from a valid identification document (e.g., passport, driver’s license).
- Company Applicant Information: For entities created or registered after January 1, 2024, details of the individual responsible for filing the creation or registration document must also be reported.
Deadlines for Compliance
- Companies formed or registered before January 1, 2024, must file their reports by January 1, 2025.
- For companies formed or registered after January 1, 2024, the reporting deadline is within 90 calendar days of receiving notice of their creation or registration.
- For entities created or registered after December 31, 2024, the deadline is within 30 calendar days.
Penalties for Non-Compliance
Noncompliance can result in substantial penalties, including civil fines up to $500 per day and criminal penalties of up to $10,000 and/or imprisonment for up to two years.
How to File a Report
Reports will be submitted electronically through a secure filing system available via FinCEN’s BOI E-Filing website (https://boiefiling.fincen.gov). The system is designed to ensure the confidentiality and security of the submitted information, which is not publicly accessible but can be disclosed to certain government and financial institutions under specific circumstances.
Conclusion
The Beneficial Ownership Information Reporting Rule introduces a new layer of regulatory compliance for businesses operating in the U.S. It's crucial for affected companies to understand their reporting obligations and prepare accordingly to ensure compliance by the stipulated deadlines.
For detailed guidance and updates on the reporting process, companies should regularly check FinCEN’s website United States Department of the Treasury Financial Crimes Enforcement Network | FinCEN.gov or Beneficial Ownership Information Reporting | FinCEN.gov.
DISCLAIMER:
This blog does not, and is not intended to, constitute legal advice; instead, it is for general informational purposes only. The information presented in this blog may not reflect the most up-to-date legal developments and is subject to change at any point in time. The information presented in this blog does not create an attorney-client relationship. Readers of this blog should contact their attorney to obtain advice regarding any particular legal matter. No readers should act or refrain from acting based on the information presented in this blog without first seeking legal advice from counsel in the relevant jurisdiction. No representations are made that this blog is error-free. Altaffer & Chen PLLC expressly disclaims all liabilities arising from any actions taken or refrained from based on the information presented in this blog.
1/10/2024
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