US Beneficial Ownership Information Reporting: What This Means for Companies

Starting from January 1, 2024, the Corporate Transparency Act requires US-registered companies, including foreign companies registered to do business in any US state and US subsidiaries of foreign parents, to report Beneficial Ownership Information to the US Treasury Department's Financial Crimes Enforcement Network (FinCen).

Chris Spillman

June 14, 2024

The US Beneficial Ownership Interests Report is aimed at providing information that government agencies can refer to in order to prevent “bad actors” from using multiple shell companies and other opaque business structures to avoid paying the required amount of income tax or otherwise hide or benefit from ill-gotten gains.

What is Beneficial Ownership Information?

This is really just personal, identifying information about individuals who directly or indirectly own or control a legal entity. The government’s stated goal of this reporting requirement is to deter money laundering and other financial crimes by making known, to the government at least, who actually owns or controls companies who may be involved in those activities. It may also have the added benefit of making it clearer who owns or is responsible for businesses that generate taxable sales, receipts, and/or income.

Although reporting of beneficial ownership has been common in other jurisdictions for some time, the US has somewhat lagged behind the global market in this respect; the new law that came into force in January means that going forward, all companies formed or registered to do business in the US (aside from some specific exceptions) need to declare who ultimately owns them and provide this information to the US Department of Treasury.

Who is required to make Beneficial Ownership Information Reports—Does the New Rule Apply to Your Company?

Firstly, it should be pointed out that “reporting company” in the language of the US Government simply means “any business that needs to fill out the form and send the report.”

There are two main types of companies that need to comply with the new Beneficial Ownership Interests Reporting rules

Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States
Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office

Although these categories are very broad, there are 23 exemptions listed under the new laws for those entities that do not have to file a BOI report, essentially comprising groups of entities that already have existing requirements for disclosure of significant beneficial ownership or control interests, including:

Heavily regulated industries
Federal and state credit unions
Certain banks
Insurance companies
Nonprofits

When do you have to report and what are the Penalties for Non-compliance With the Beneficial Ownership Information Rule?

A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial beneficial ownership information report.

A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report.

Reporting companies created or registered on or after January 1, 2025, will have 30 calendar days from actual or public notice that the company’s creation or registration is effective to file their initial BOI reports with FinCEN.

Any company that fails to file a required beneficial ownership information report is subject to a fine of $500 per day, up to a maximum of $10,000 for non-compliance.Further, intentionally filing inaccurate information is a felony in the US and carries a sentence of up to 2 years or a possible 10 years when combined with anti-money laundering charges.

With penalties being charged on a day-to-day basis, this means that fees can quickly escalate and with potential prison terms of several years associated with false or inaccurate reporting, it is especially important to ensure your BOI report is fully accurate and filed correctly.

Who Can File the Report for Beneficial Ownership Information?

Although not required, your accountant or legal representatives can file the report for you. When submitting a BOI report, the actual filer will need to also provide basic contact information about themselves, including their name and email address or phone number.

The Company Applicant will be required to file a BOI Report consisting of the individual’s full legal name, birthdate, address, unique identifying number from a driver’s license, identification document, or U.S. passport, and an image of the identification document.

Rise in Fraud Related to Beneficial Ownership Information Reporting—What to Look Out For

There has been a notable increase in fraudulent requests for information and scams associated with the new Beneficial Ownership Information Reporting rule.

As with any new piece of legislation that may cause confusion for business owners, scammers, hackers and other fraudulent entities will often target those affected, claiming to be legitimate organizations and aiming to acquire sensitive information to be used for malicious purposes.

Fincen has recently issued a report alerting business owners to a fraudulent email with the title “important compliance notice”, asking people to either click a link or scan a QR code. Fincen never sends unsolicited requests like this and company owners should avoid following URL links, downloads, or scanning any QR codes and be especially careful with any individual or company seeking to acquire information in relation to Beneficial Ownership Information Reporting.

What Information Would Need to be Included for Reporting Companies?

To meet its requirements, a Reporting Company needs to report:

Legal name of the business
Any trade name or assumed name (DBA)
The address of the business and the jurisdiction in which it was first formed or registered
Taxpayer identification number

Additionally, for each individual who directly or indirectly controls or owns the company, a “Beneficial Owner”, the following details would need to be provided:

The individual’s name
Date of birth
Residential address
A copy or image of a photo ID such as a driver’s license or passport
The name of the issuing state of the ID document along with the identifying number

Contact Biztech Lawyers

If you would like more information on Beneficial Ownership Information Reporting or any of the legal requirements for US-based companies, get in touch with Biztech Lawyers for more information.

We provide technology-based businesses with agile legal services as needed in a dynamic industry. With the legal requirements for technology companies changing constantly in an ever-shifting landscape, it is important to keep up to date with any new changes in the law.

At Biztech Lawyers we are more than happy to provide business owners with all the necessary information to remain competitive and compliant.

We can handle all aspects of Beneficial Ownership Interests Reporting and a wide range of compliance areas for technology-based industries.

Contact our friendly advisors today and we can take you through the process and take some of the stress out of the Corporate Transparency Act and Beneficial Ownership Interests Reporting.

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Chris Spillman

Managing Director - Americas

Chris holds an indisputable reputation as a key and trusted advisor in the areas of corporate law and commercial transactions, having started out with Kirkland & Ellis. He later became general counsel for NYC fintech Quadpay before, during and after major cross-border acquisition and was responsible for all operational, partnerships, financing, contracts, and compliance work.

Through Spillman & Partners, he helped buy and sell multiple US tech companies, finance global growth through debt, equity and hybrid offerings, negotiate global tech agreements and commercial contracts with national and global e-commerce retailers and consumer brands.

Chris is Biztech Lawyers’ Managing Director for the Americas. As a tech-centric law firm we use an array of legal technology to make legal processes more efficient, allowing clients to grow as painlessly as possible. Our global offerings are also an opportunity to propel the world’s most innovative companies to reach international markets. We’re your growth partners.

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