Benefit Ownership Information (BOI) reporting, a new anti-money-laundering initiative affecting most entities, will take effect on January 1, 2024. Enacted through the Corporate Transparency Act of 2021, its purpose is to keep racketeers including oligarchs, financiers of terrorism, drug traffickers, and human traffickers from using anonymous shell companies and other corporate structures to hide ill-gotten gains. Last fall, the Financial Crimes Enforcement Network (FinCEN) issued final rules for complying with this new requirement.
Although aimed at the bad actors noted above, BOI reporting requires most entities to file information on its underlying “beneficial owners” with FinCEN. Entities formed before December 31, 2023 (existing entities) will have one year – until January 1, 2025 – to file for the initial 2024 calendar year. But new entities formed in January 2024 or later, and any having a change in owner information, will have only 30 days to file these reports with FinCEN. This creates a potential monthly reporting tracking requirement to keep up with an entity’s information changes.
A beneficial owner is anyone who (directly or indirectly) owns or controls at least 25% of the ownership interests of a corporation, limited liability company (LLC), business trust, or limited partnership registered to do business in the US. Anyone who exercises substantial control over such an entity also meets the definition of a beneficial owner. Entities must provide FinCEN with the name, date of birth, and address of each such person along with a copy of a document containing a unique identifying number acceptable to FinCEN.
Most businesses are subject to these filing requirements, although some large operating entities and publicly traded companies are exempt. Among 23 exceptions noted by FinCEN are heavily regulated industries that are already disclosing similar information to the government.
Penalties can be imposed for willfully not filing. FinCEN has said they are not after small business, but they have not yet provided a definition of willfully not filing.
We at LMC are monitoring this new anti-money-laundering initiative. Feel free to reach out to your LMC professional with any questions or concerns.
Jeffrey Gold, CPA