December 28, 2023
Starting in 2024, many businesses will be required to report certain information about company ownership to the Financial Crimes Enforcement Network (FinCEN). The new requirement is mandated by the Corporate Transparency Act which passed in 2021. The purpose of the legislation is to make it easier for the federal government to fight tax fraud, money laundering, and terrorist activities financed through domestic companies. Under new rules, new and existing small businesses and limited liability companies are required to disclose information about their beneficial owners. This includes the name, date of birth, and address of each owner along with a unique identifying number from a passport or driver’s license is required.
Last month a Final Rule was issued making it easier for many businesses to report using FinCen Entity ID numbers. Rather than having to provide full biographical information on each beneficial owner, companies with these IDs are only required to report limited information. This change makes reporting easier for those with ownership interests in multiple reporting entities. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key information below.
The Beneficial Ownership Information (BOI) Reporting Requirements Rule was established in September 2022 under the Corporate Transparency Act (CTA), a ruling that required businesses to report identifying information about who owns, controls, forms, and registers businesses, to the Department of the Treasury. BOI reporting requirements are set to take effect in January 2024. Under the rule, certain companies need to report “beneficial owner” information to the Financial Crimes Enforcement Network (FinCEN), a bureau under the Department of the Treasury.
The Final Rule as part of BOI requirements was published in November 2023 and is designed to simplify the reporting process for companies that use an existing FinCEN entity identifier (or FinCEN ID) instead of needing to report using full biographical information from individual beneficial owners. This can make the process easier for businesses that may have multiple entities or otherwise complicated ownership configurations.
When the following conditions are met, this final rule on BOI reporting can apply:
An individual may also be considered a beneficial owner of the company filing the report if that ownership is through the ownership interest in the other entity with the FinCEN ID, and if it translates into substantial control over the reporting company.
Instead of having to provide the required information for each beneficial owner, the Final Rule cuts down on the reporting burden by only requiring the FinCEN individual identifier. In 2024, millions of companies will need to report beneficial owner information. This simplified reporting can make the process easier for many who already have FinCEN IDs in other, shared entities. The updated rule should streamline the reporting process and help companies keep up-to-date, accurate BOI records more easily.
As previously mentioned, beneficial owners who are individuals do not apply under the rule and would still need to share all biographical information. Rules around beneficial ownership, especially with more complex business structures, can get complicated. Businesses that may be subject to BOI reporting requirements should consult an attorney and learn more about the regulatory standard on FinCEN’s website.
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The detail of the Final Rule streamlines the reporting process for certain businesses. Since reporting is required starting on January 1, 2024, it is important to determine how you will be affected. If you have questions about the information outlined above or need assistance with a tax or accounting issue, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.