As 2024 comes to a close, companies created prior to January 1, 2024 should be mindful of the year-end deadline to analyze whether they must report Beneficial Ownership Information (“BOI”) to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) pursuant to the reporting provisions of the Corporate Transparency Act (“CTA”). Companies should take immediate action to determine whether filing is necessary to avoid potential civil and/or criminal penalties. McGuireWoods described the CTA’s requirements in a previous post and the requirements are also summarized below.
Reporting Requirements
The CTA requires certain domestic and foreign corporations, LLCs, or other entities to report BOI to FinCEN for all Beneficial Owners. Beneficial Owners are those that own, directly or indirectly, 25% of the Reporting Company, or individuals who exercise substantial control. Substantial control means:
- Serving as a senior officer (typically C-Suite executives);
- Having authority to appoint or remove a senior officer of the board majority; or
- Directing, determining or having substantial influence over important decisions.
The following BOI must be reported for all Beneficial Owners:
- Full legal name;
- Date of birth
- Complete current address;
- Unique identifying number from a U.S. passport, state ID, driver’s license, or non-expired foreign-issued passport; and
- An image of the identification document from which the unique identifier was obtained.
Reporting Companies created on or after January 1, 2024 must also identify and report BOI for at least one Company Applicant (at most two). A Company Applicant is the individual who either directly files the document that created the Reporting Company or directs or controls the filing action.
Individuals who are Beneficial Owners or Company Applicants can, upon request via an electronic web form, receive a unique identifying number from FinCEN (a “FinCEN Identifier”). Reporting Companies may report the FinCEN identifier of the individual in place of that individual’s otherwise required personal information on a BOI report.
Exemptions
There are 23 exemptions to the CTA including:
- Large operating companies (more than 20 full time employees and $5 million in gross receipts/sales, excluding disregarded entities);
- Public companies;
- Venture capital fund advisors;
- Pooled investment vehicles;
- Subsidiaries of certain exempt entities (must be directly or indirectly wholly owned subsidiaries);
- Insurance companies and insurance producers;
- Other highly regulated entities, such as:
- Banks;
- Credit unions;
- Bank holding companies;
- Securities brokers or dealers;
- SEC-registered investment companies or investment advisers; and
- Exchange or clearing agencies; and
- Inactive entities.
Filing Deadlines
Reporting Companies created prior to January 1, 2024 have until January 1, 2025 to file an initial BOI report.
As a reminder, Reporting Companies created on or after January 1, 2024 must file their initial report within 90 days of the earlier of the date on which the entity receives actual notice of creation, or a secretary of state first provides public notice of the creation of the entity. For Reporting Companies created or registered on or after January 1, 2025, their initial BOI reports must be filed within 30 calendar days of receiving actual or public notice of their creation or registration becoming effective.
Next Steps
Entities with potential reporting obligations (especially those created prior to January 1, 2024) should carefully examine these requirements to determine whether they will need to submit a BOI report by year end.
McGuireWoods has been tracking this rule and its implementation and can assist clients by:
- Advising on whether an entity meets the definition of a Reporting Company.
- Analyzing whether exemptions apply.
- Analyzing who may meet the definition of a beneficial owner and substantial control person.
- Analyzing nuances in the law as applied to private equity entities, healthcare entities, joint ventures, and trusts.
- Assisting clients in establishing a CTA compliance program to ensure regular review, documentation of decisions, and reporting of material changes in BOI.
For questions about these new rules, the CTA, or anti-money laundering (“AML”) compliance, including customer due diligence and beneficial ownership rules, more generally, contact the authors of this article or another member of the McGuireWoods Financial Services & Securities Enforcement team, Government Investigations & White Collar Litigation team, Healthcare team, Tax & Employment Benefits team, or Corporate & Private Equity team.