The US Corporate Transparency Act was primarily introduced to help tackle illegal activities by increasing the transparency of company ownership structures. By requiring companies to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), this Act aims to prevent the misuse of corporations and limited liability companies for criminal gain, such as money laundering, fraud, and financing of terrorism.

1. What is beneficial ownership information?

Beneficial Ownership Information encompasses details about individuals who directly or indirectly own or control a company. Identifying these owners is crucial to understanding who you are doing business with, so decisions can be made with confidence and within risk tolerance.

2. Why is beneficial ownership information important?

Accurate data about beneficial ownership makes it harder for wrongdoers to hide behind or benefit from opaque ownership structures. Shell companies, for example, can be used to disguise illicit activities and the money generated from them. It can be difficult and time-consuming to identify patterns of shell company risk without access to beneficial ownership information.

3. Who has to file beneficial ownership information?

There are two types of reporting companies that fall within the BOI rules set out by FinCEN:

– Domestic reporting companies: These are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar US office.

– Foreign reporting companies: These are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the US by the filing of a document with a secretary of state or any similar office.

4. When and how do entities need to file beneficial ownership information?

When?

– For companies formed BEFORE 1/1/2024, filing is due by 1/1/2025.

– For companies formed between 1/1/2024 and 12/31/2024, filing is due within 90 days after receiving notice of effective creation or registration.

– For companies formed AFTER 12/31/2024, filing is due within 30 days after receiving notice of effective creation or registration.

How?

Companies required to report their beneficial ownership information to FinCEN must do so electronically through a secure filing system available via the FinCEN website. Information on beneficial owners includes names, dates of birth, addresses, and identifying numbers such as a passport or driver’s license (which will have to be uploaded). The report can be filed by anyone with authority from the reporting company, such as an employee, owner, or third-party service provider.

Regarding updating reports:

If there is a change in the status of the company or its beneficial owners, the report must be updated within 30 days of the change.

5. What are the consequences of not filing or misfiling beneficial ownership information?

The civil penalty for not reporting by your respective due date is $591 per day, with no cap. The criminal penalty includes imprisonment for up to two years and/or a $10,000 fine. It is important to note that both civil and criminal penalties could stack. Additionally, more than one person could be charged regarding the same violation.