**This post was updated 12/15/2023 to reflect new updates from FinCEN.
WHEN ARE FINCEN REPORTS DUE?
Starting on January 1, 2024, most business entities have a new reporting requirement with the Financing Crimes Enforcement Network, a bureau of the United States Department of the Treasury (“FinCEN”). FinCEN is tasked with safeguarding the financial system against money laundering and other illicit activity.
- Beginning on January 1, 2024, “Reporting Companies” formed on or before December 31, 2023 must file a “Beneficial Ownership Information Report” (a “BOI Report”) with FinCEN. Such entities have until January 1, 2025 to file its BOI Report.
- Reporting Companies formed on or after January 1, 2024 must file a BOI Report within ninety (90) days of the entity’s formation date.
WHAT IS A REPORTING COMPANY?
A Reporting Company a business entity, including a corporation or an LLC, which is created by filing a formation document with the Secretary of State in any state in the U.S. Accordingly, many small business entities in the U.S. are subject to FinCEN’s reporting requirements.
WHO OR WHAT IS A BENEFICIAL OWNER SUBJECT TO FinCEN REPORTING?
A “Beneficial Owner” is an individual, trustee, entity or other party owning an “Ownership Interest” in a Reporting Company that:
- exercises “Substantial Control” over a Reporting Company, or
- owns or controls at least 25% percent of the Ownership Interest in a Reporting Company.
“Substantial Control” includes the power to appoint or remove officers, owners, or similar parties and the power to make financial decisions or control business activity and similar powers.
WHAT IS AN OWNERSHIP INTEREST SUBJECT TO FINCEN REPORTING?
An “Ownership Interest” means an individual, trustee, entity or other party owning 25% of:
- equity, stock or voting rights;
- joint ownership; or
- other direct or indirect rights of ownership in or control of a Reporting Company.
ARE ANY BENEFICIAL OWNERS EXEMPT FROM FINCEN?
Yes. Exemptions include:
- Minor Children: though a parent/guardian would register in their place until the minor reaches the age of majority
- Nominee, intermediary, custodian, or agent: these are individuals merely acting on behalf of an actual beneficial owner, like a tax professional
- An Employee: cannot be a senior officer in the company
- Inheritor: meaning those with solely a future interest
- Creditors
WHAT IS A REPORTING COMPANY REQUIRED TO REPORT?
A Reporting Company must identify all non-exempt Beneficial Owners of the entity and, if the Reporting Company was formed on or after January 1, 2024, then it must also report the “Company Applicant”.
WHAT IS A COMPANY APPLICANT?
Reporting Companies formed on or after January 1, 2024 are required to report:
- The Direct Filer, or the individual who filed organizational documents with the Secretary of States Office; and/or
- The Indirect Filer, or the individual who directs or controlled such filing.
This means if a Reporting Company’s Secretary of State filings are filed by its accountant or law firm, such as Sousa Marujo Ltd., then it must report the name of individual in the office who actually filed the entity and the individual in the office who instructed the report to be filed.
If your company files annual reports without professional assistance then the person who prepares and files the paperwork with the Secretary of State will be reported as the Company Applicant.
*Companies formed before January 1, 2024 are not required to report Company Applicants.*
WHAT INFORMATION GETS REPORTED?
Reporting Company Information:
- Full Legal Name
- Any Trade Name or DBA
- Complete US Address (principal place of business)
- State Jurisdiction Information
- IRS RIN, including EIN
Beneficial Owner and Company Applicant Information:
- Full legal name
- Date of birth
- Complete current address—residential only, unless it is a company applicant who forms/registers the company in the course of their business, like attorneys
- Unique identifying number and issuing jurisdiction from, and image of:
- US Passport
- Driver’s License
- ID issued by state
- Foreign passport
HOW IS A BOI REPORT FILED?
At this time, the only information FinCEN has published is a guide to reporting requirements, which we have summarized here.
Reports will be filed electronically.
- Entities formed before January 1, 2024 must file BOI Reports before January 1, 2025.
- Entities formed on or after January 1, 2024 have 90 days from the Secretary of State filing date to file a BOI Report.
Filing Obligations are Continuous.
After filing its initial BOI Report, entities must report changes to BOI Reports and or fix inaccuracies within thirty (30) days of the change or inaccuracy’s discovery. Changes to be reported include registering for a DBA, change of beneficial ownership (for example if a qualifying stock sale or equity ownership transfer occurs), and changes to the beneficial owner’s name, or other reportable information.
FAILURE TO TIMELY FILE BOI REPORTS: FINES AND OTHER PENALTIES
FAILURE TO FILE A REQUIRED BOI REPORT CAN INCLUDE CIVIL PENALTIES OF UP TO $500/DAY, FOR EACH DAY THE VIOLATION CONTINUES, AS WELL AS CRIMINAL PENALTIES OF IMPRISONMENT OF UP TO 2 YEARS AND/OR A $10,000 FINE.
Senior officers of a Reporting Company that fails to file a required BOI Report may be held accountable for such failure. Additionally, if an individual withholds information necessary for a BOI Report to be filed, that individual may also be subject to civil and/or criminal penalties.
WHAT DO I DO NEXT?
Sousa Marujo is closely monitoring FinCEN’S website for establishment of the filing portal and for any additional guidance from FinCEN.
As more guidance is published, we will update this blog post and send updates to you. An opt-in form will also be sent to our existing corporate clients to permit us to file the BOI Reports on your behalf.
If you are not an existing corporate client and would like more information, or, if you have any additional questions please reach out to Louis at lasousa@sousamarujo.com or Sandra at ssousa@marujo.com, or give us a call at 401-270-0600.