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There are new federal reporting requirements that businesses should pay attention to. This year, more than 32 million businesses will be required to complete the US Treasury Department’s Financial Crimes Enforcement Network’s (FinCEN) Beneficial Ownership Information Report.
The form is part of the federal Corporate Transparency Act passed in 2021. It intends to reduce money laundering and concealment of illicit funds by shell companies and other entities. Existing companies must complete the electronic forms by the end of the year. Entities created this year have 90 days from their start to file.
Who Must File These Reports?
There are two kinds of reporting companies:
- Domestic reporting companies: Corporations, limited liability companies, and other entities created by filing a document with a secretary of state or a similar office in the US
- Foreign reporting companies: Entities (including limited liability companies and corporations) formed under a
- foreign country’s laws that are registered to do business in the US by filing a document with a secretary of state or a similar office
Twenty-three types of entities are exempt from reporting requirements. They’re listed on page six of this FinCEN FAQ document. Beneficial owners must also file reports. Filings must be updated when a beneficial owner changes their address or marital status or gets a new driver’s license.
What Does FinCEN Want to Know?
The most critical information the agency seeks is the identity and role of those with a beneficial ownership stake in the business. They are generally part-owners with at least 25% ownership of an entity. This can also include those exercising substantial control over the organization, including:
- President
- Chief financial officer
- General counsel
- Chief executive officer
- Chief operating officer
Other information you must share includes your company’s:
- Legal, trade names, or “doing business as” name
- Street address, not post office box
- State where the company was formed
- Tax and employer identification numbers
You must also provide an image of your articles of incorporation. Each beneficial owner must provide the following:
- Full legal name
- Birthdate
- Home address, not post office box
In addition to this information, an image of an unexpired driver’s license, passport, or a state, local government, or Indian tribe identification document must be submitted.
Who Has Access to This Information?
FinCEN can allow the following to obtain
beneficial ownership information for national security, law enforcement, and intelligence purposes:
- Federal, state, local, and tribal agencies
- Certain foreign officials submitting a request to a federal government agency
Financial institutions could access this information in limited circumstances if the reporting company consents. Otherwise, the reported information will be stored in a secure, non-public database.
What Might Happen If I Don’t Cooperate?
If a reporting company or beneficial owner files a report with errors, they have 90 days from the applicable deadline to make corrections without penalty. The willful failure to report a complete or updated report, or willfully providing or trying to provide fraudulent or false beneficial ownership information, may result in:
- Civil penalties: Up to $500 for each day the violation continues
- Criminal penalties: Up to two years of imprisonment and/or a fine of up to $10,000
Senior officers of an entity failing to file a report may be held accountable for the organization’s failure.
If you have questions about filing this report and the information you must share, contact your attorney to ensure you comply with your legal obligations.
