Countdown to Compliance: Beneficial Ownership Reporting Requirement

And who is a “company applicant”?

“Simply put, a company applicant is the individual who files an application to form a corporation, LLC, or other entity formed by filing a document with a state, or who registers or files an application to register a non-U.S. entity in the U.S. And if more than one individual is involved in the filing of the document, the company applicant is the person who is primarily responsible for directing or controlling the filing,” says Feldman.

What level of personal detail needs to be included?

For the company section, you have to include the reporting company’s 1) full legal name, 2) any trade or “doing business as” names, 3) complete current street address of the principal U.S. place of business, 4) the state, tribal or foreign jurisdiction of formation, and 5) the IRS Taxpayer Identification Number (TIN). For a foreign reporting company, 4) is the state or tribal jurisdiction where the company first registers, and 5) will be a tax identification number issued by a foreign jurisdiction and the name of that jurisdiction.

For beneficial owners or company applicants, applicable businesses must report their 1) full legal name, 2) date of birth, 3) current residential street address (except for company applicants acting as such in the course of their business, who must give their business address), 4) an identifying number from an acceptable document. Acceptable documents include a current U.S. passport, driver’s license or other state or local ID, Indian tribe ID or – if the individual has none of those – a foreign passport, and an image of the document from which the unique identifying number was obtained. Alternatively, an individual can also request and use a FinCEN unique identifying number.

“Now, let’s say that an exempt entity has or will have a direct or indirect interest in a reporting company, and an individual is a beneficial owner of the reporting company exclusively by virtue of the individual's ownership interest in the exempt entity. In that case, the reporting company only needs to name the exempt entity and doesn’t need to report the other information in respect of the business owner,” says Feldman.

What will FinCEN do with my information? Who will have access to it?

The information collected will be kept in a private database maintained by FinCEN, and it will not be accessible to the public. In fact, FinCEN is required to implement protocols to safeguard beneficial ownership information, build a secure system to store the information and establish procedures to ensure that only authorized users can access the information and only for authorized purposes.

However, FinCEN is authorized to disclose BOI to a limited group of requestors. These include:

1. Federal agencies engaged in national security, intelligence and law enforcement
2. State, local, and Tribal law enforcement agencies with a court order
3. The Treasury Department
4. Financial institutions – with the company’s consent, for customer due diligence purposes
5. Government regulators of financial institutions to determine the compliance with customer due diligence laws
6. Certain foreign authorities requesting information through a U.S. agency.

If or when the reporting company ends, the information will stay on file for at least five years after that.

Are there ways to make BOI reporting easier?

There’s an option to make things easier for those who have to file for several companies. This isn't required, but beneficial owners, company applicants, and reporting companies can apply to FinCEN for a unique number called a FinCEN Identifier.  That's a unique number that's issued for that individual or company.

“The way it works is that the FinCEN Identifier application would ask for all the personal information that would have to be reported in the Beneficial Ownership Information report. Now, the individual can simply provide their FinCEN Identifier to each reporting company in which they’re a beneficial owner, rather than giving each company their personal information and ID. The reporting company can then include the FinCEN Identifier on their BOI report. Of course, if any information in the FinCEN Identifier application changes, the applicant would still have to file an update or correction within 30 days,” says Spencer.

A reporting company can also obtain a FinCEN Identifier by submitting to FinCEN an application at or after the time that the entity submits an initial report. Each individual or company can only get one FinCEN Identifier. Applications for a FinCEN Identifier can be submitted via the filing system on FinCEN’s website starting January 1, 2024.

Will I have to file the BOI report every year now?

The CTA only requires an initial BOI report, an updated report (when necessary), and a corrected report (when necessary). You will have to keep track of all the information you reported and file updates when it changes. 

What happens in case of changes?

“There’s a good chance you might have to file an update: FinCEN estimates that about 6.6 million businesses will file updates to their reports in 2024 alone. And every year after that, 14.5 million updates will likely be filed. That’s not even taking into account yet the updates that perhaps millions of individuals who have obtained FinCEN Identifiers will have to file when their personally identifiable information changes , as they will have to file an updated application with FinCEN,” says Feldman.

"Here’s something important to remember now to save yourself headaches down the line, because it’s not even just about the first filing: keep track of the information you’re reporting. That way, if anything changes, you can file timely updates when necessary," says George May, Vice President, Small Business Segment with Wolters Kluwer.

There are several scenarios where change will – or will not – require filing an update to the BOI report:

• If there is any change in the information reported about the reporting company or its beneficial owners, the reporting company must file an updated report within 30 days of the change. This includes a change in beneficial owners and if the reporting company becomes eligible for an exemption.
  • If a beneficial owner dies, an updated report identifying new beneficial owners must be filed within 30 calendar days of the settlement of the beneficial owner’s estate.
  • If a reporting company meets the criteria for an exemption after it already filed the initial report, it will need to file an updated report that indicates the filing entity is no longer a reporting company.
• If an entity was exempt but no longer is, it must file a BOI report within 30 days of no longer meeting the criteria for an exemption.
• Reporting companies do not have to update information on company applicants. But they do still have to file a correction if any information previously reported is inaccurate about their company applicants. Also, when there is a change in the name, date of birth, address or unique identifying number on the document, reporting companies are required to update the image of the identifying document.
• If an individual or reporting company applied for a FinCEN Identifier and the submitted information changes, the individual or reporting company must file an update within 30 days.

What happens in case of a mistake in my BOI report?

It is unlawful for any person to willfully fail to report complete or updated beneficial ownership information to FinCEN or willfully provide false or fraudulent information. Violators are subject to a civil penalty of up to $500 for each day the violation continues, and criminal fines of up to $10,000, imprisonment for up to two years, or both. The CTA also imposes penalties for the unauthorized disclosure of information. If a report was inaccurate when filed, the reporting company has to file a corrected report within 30 calendar days after becoming aware of the inaccuracy or has reason to know of the inaccuracy.