On September 29, 2022, the Financial Crimes Enforcement Network (FinCEN) issued its final rule (the “Final Rule”) implementing Beneficial Ownership Information (“BOI”) reporting requirements on most existing and newly formed U.S. and registered foreign business entities that are created by filing a document with a secretary of state or any similar office (“Reporting Companies”). The Final Rule goes into effect on January 1, 2024 and requires new Reporting Companies to file a BOI Report with FinCEN within thirty (30) days of formation of the company. Existing Reporting Companies will have until January 1, 2025 to file their initial reports. The final form for the BOI Report has not yet been released by FinCEN.

The Final Rule requires Reporting Companies to disclose the beneficial owners of the company and the company applicants in their BOI Report. Reporting Companies existing prior to January 1, 2024 will be exempt from disclosing company applicants. For domestic Reporting Companies, a company applicant is defined under the Final Rule as the individual who directly files the document with the secretary of state or similar entity that creates the company. For foreign Reporting Companies, the company applicant is the individual who directly files the document that first registers the foreign company in any state of the United States.

A beneficial owner is defined under the Final Rule as any individual who, directly or indirectly, either exercises substantial control over the Reporting Company or owns or controls at 25% of the ownership interests in the Reporting Company. An individual is considered as exercising substantial control over the company if they are a senior officer, have authority to appoint or remove senior officers, or have substantial influence over important decisions made by the Reporting Company. An individual is considered as owning or controlling 25% or more of the company if: 1) they hold 25% or more of the total ownership interests in the company individually or jointly with another person; 2) they are a trustee of a trust that owns more than 25% of the company and have authority to dispose of trust assets; or 3) they are a beneficiary of a trust that owns more than 25% of the company and have the right to receive all of the income and principal of the trust or to demand a distribution of substantially all of the assets of the trust. Trust grantors and settlors will also be considered beneficial owners if they have the right to revoke the trust or withdraw assets from the trust.

Beneficial owners and company applicants will be required to provide their full legal name, current address, date of birth, and a photo or copy of their passport, state identification card, or state driver’s license.

FinCEN issued the Final Rule under the Corporate Transparency Act, which was passed in January of 2021.  Companies have been required to provide similar beneficiary information to certain financial institutions upon opening new accounts since 2016 under the Bank Secrecy Act. However, the Final Rule issued by FinCEN requires substantially more information be provided by Reporting Companies in their BOI Report than that required by financial institutions, despite concerns that such expansive reporting requirements could place a significant burden on small businesses.

If you have any questions about these new reporting requirements or need help with a BOI Report when the deadline approaches, please contact one of the business law attorneys at RMP for assistance.