The Beneficial Ownership Reporting Requirement is a new law designed to enhance corporate transparency in the United States. This legislation, introduced under the Corporate Transparency Act (CTA) of 2021, aims to prevent illegal activities such as money laundering, tax evasion, and terrorist financing. Understanding its implications, registration deadlines, and penalties for non-compliance is critical for U.S. corporations.
Purpose of the Beneficial Ownership Law
The purpose of the Beneficial Ownership law is to close loopholes that allow for anonymous corporate ownership. Many financial crimes are committed using shell companies, where the true owners (beneficial owners) are hidden. By requiring corporations to disclose their beneficial owners, authorities can better monitor suspicious financial activities. This requirement is part of a broader initiative to combat financial crimes.
Who Must Register?
The Beneficial Ownership Reporting Requirement applies to a broad range of U.S. corporations, limited liability companies (LLCs), and similar entities. Companies formed or registered in the United States must comply with this regulation. Specifically, any corporation or LLC engaged in interstate or foreign commerce must register. However, certain companies are exempt from registration, including:
- Large operating companies with more than 20 employees and $5 million in annual revenue.
- Publicly traded companies already subject to SEC reporting requirements.
- Regulated entities such as banks, credit unions, and insurance companies.
Despite these exemptions, most small businesses must comply. Beneficial owners are those individuals who own or control at least 25% of the company. In addition, anyone who exercises substantial control over the business must also be reported.
How Can Businesses Register and Submit Forms?
The filing of Beneficial Ownership information is handled through the Financial Crimes Enforcement Network (FinCEN). While specific URLs for the filing portal may change over time, you can typically access the portal and other important resources through the following links:
FinCEN Beneficial Ownership Reporting Information:
FinCEN Online Reporting Portal:
To comply with the Beneficial Ownership Reporting Requirement, businesses must register and submit forms through the Financial Crimes Enforcement Network (FinCEN). The process has been streamlined to ensure ease of use, though accuracy is crucial.
Step 1: Access the FinCEN Portal
Businesses must access the FinCEN portal to begin the registration process. This portal is a secure, web-based platform provided by the U.S. Department of the Treasury. Before accessing the forms, businesses must create an account through the portal.
Step 2: Gather Necessary Information
Before submitting, businesses need to gather the required details about their beneficial owners. The necessary information includes:
- Full legal name.
- Date of birth.
- Residential or business address.
- Government-issued identification (e.g., passport or driver’s license).
Carefully verifying this information ensures accurate submission and helps avoid penalties.
Step 3: Complete the Beneficial Ownership Form
Once the information has been collected, businesses must fill out the Beneficial Ownership Information (BOI) form. This form is available within the FinCEN portal and asks for details regarding:
- Company name and structure.
- Employer Identification Number (EIN).
- Company jurisdiction.
- Information for each beneficial owner.
Reviewing the form for accuracy before submission is essential to avoid errors.
Step 4: Submit the Form
After completing the form, businesses can submit it through the FinCEN portal. The submission process includes verifying the information and agreeing to FinCEN’s terms. A confirmation will be provided upon successful submission, offering proof of compliance.
Step 5: Update Information if Changes Occur
Businesses must keep their beneficial ownership information up to date. If ownership changes occur, updated information must be submitted within 30 days. The process for updates mirrors the original submission process, using the FinCEN portal.
Paper Filing Option
While the online method is encouraged, FinCEN also offers a paper-based filing option. This option involves requesting, completing, and mailing a hard copy of the BOI form to FinCEN. However, the online process is faster and provides immediate confirmation.
Deadlines for Filing
The filing requirements for beneficial ownership information come with strict deadlines. For newly formed companies, registration must occur at the time of incorporation or shortly thereafter. Existing companies, however, have until January 1, 2025, to submit their information. This extended deadline was given to allow existing corporations time to prepare for compliance.
New corporations formed after the law’s enactment must register within 30 days of formation. If there are changes to a company’s beneficial owners, updated information must be filed within 30 days of the change.
What Information Must Be Filed?
The information that must be filed includes identifying details of each beneficial owner. This includes:
- Full legal name.
- Date of birth.
- Residential or business address.
- Government-issued identification (such as a passport or driver’s license).
The registered companies must also provide details about the entity, including its legal name, jurisdiction, and EIN (Employer Identification Number).
Penalties for Failing to File
The penalties for failing to comply with the Beneficial Ownership Reporting Requirement are severe. Corporations that do not file by the deadline, or provide false information, face significant fines and possible criminal charges. Civil penalties can reach up to $500 per day for late or incomplete filings. In cases of willful non-compliance, individuals may face criminal fines of up to $10,000 or even two years of imprisonment.
Additionally, providing false information or intentionally omitting material facts can result in similar penalties. Therefore, it is crucial for companies to ensure the accuracy and timeliness of their filings.
Why is Compliance Important?
Failure to comply with the Beneficial Ownership law may lead to significant legal and financial consequences. The law has been established to increase accountability and prevent illegal financial activities. By ensuring transparency in corporate ownership, regulators aim to reduce the use of shell companies for fraudulent purposes. Therefore, businesses must prioritize compliance to avoid penalties and maintain their reputation.
Do Companies Need to Hire an Attorney to File?
No, businesses are not required to hire an attorney or special company to file their Beneficial Ownership information. The process is designed to be simple and accessible through the FinCEN portal, allowing businesses to file on their own.
However, hiring legal or professional assistance may be beneficial in certain cases. Businesses with complex ownership structures or unfamiliarity with regulatory compliance may seek help to ensure accuracy. Additionally, some companies may want professional assistance to avoid potential penalties or errors.
While most small businesses can handle the filing themselves, consulting an attorney can provide peace of mind.
Conclusion
The Beneficial Ownership Reporting Requirement for U.S. companies plays a crucial role in enhancing financial transparency and curbing illicit activities. Companies must understand their obligations, register in a timely manner, and provide accurate information to avoid significant penalties. The new law marks an important step in promoting a transparent corporate environment in the United States.
In summary, most U.S. companies must register their beneficial owners by the established deadlines. The consequences for failing to file or providing false information can be severe, including heavy fines and possible criminal penalties. Companies should ensure compliance to maintain a lawful business environment.
Mr. Kelly is an expert in data modelling, technical analytics and forecasting. Tim has extensive experience in online marketing, search engine optimization, content development and content distribution. He has consulted some of the top brokerages, media companies and financial exchanges on online marketing and content management including: The New York Board of Trade, Chicago Board Options Exchange, International Business Times, Briefing.com, Bloomberg and Bridge Information Systems and 401kTV.
After leaving management of ForexTV in 2018, he continues to be a regular market analyst and writer for forextv.com. He holds a Series 3 and Series 34 CFTC registration and formerly was a Commodities Trading Advisor (CTA). Tim is also an expert and specialist in Ichimoku technical analysis. He was also a licensed Property & Casualty; Life, Accident & Health Insurance Producer in New York State.
In addition to writing about the financial markets, Mr. Kelly writes extensively about online marketing and content marketing.
Mr. Kelly attended Boston College where he studied English Literature and Economics, and also attended the University of Siena, Italy where he studied studio art.
Mr. Kelly has been a decades-long community volunteer in his hometown of Long Island where he established the community assistance foundation, Kelly's Heroes. He has also been a coach of Youth Lacrosse for over 10 years. Prior to volunteering in youth sports, Mr. Kelly was involved in the Inner City Scholarship program administered by the Archdiocese of New York.
Before creating ForexTV, Mr, Kelly was Sr. VP Global Marketing for Bridge Information Systems, the world’s second largest financial market data vendor. Prior to Bridge, Mr. Kelly was a team leader of Media at Bloomberg Financial Markets, where he created Bloomberg Personal Magazine with an initial circulation of over 7 million copies monthly.
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