US regulator updates and expands guidance on beneficial ownership reporting requirements

Background

FinCEN’s beneficial ownership information (“BOI”) reporting requirements, promulgated pursuant to the Corporate Transparency Act (“CTA”), will take effect on January 1, 2024.  As we reported here, FinCEN issued a final rule implementing the BOI reporting requirements of the CTA in September 2022 (the “Reporting Rule”).  Many entities, including corporations and limited liability companies created in or registered to do business in the United States, will be required to report information about their beneficial owners. 

On March 24, 2023, FinCEN issued Initial Beneficial Ownership Information Reporting Guidance which described the key elements of the Reporting Rule, including information on reporting companies, beneficial owners, company applicants, BOI reports, and timing. Resources released on March 24 included:

• FAQs about the reporting requirement;
• Brief guidance on filing dates and key questions; and
• Introductory and detailed informational videos about the reporting requirement.

Small Entity Compliance Guide

FinCEN has now published a Small Entity Compliance Guide (the “Guide”) intended to help businesses determine if they are required to report BOI to FinCEN.  The Guide describes each of the Reporting Rule’s provisions in approachable language, answers key questions, and provides graphics and checklists to assist in compliance with the Reporting Rule.  FinCEN’s revised and updated FAQs address reporting requirements, with content incorporated from the Guide.

Small businesses should continue to monitor FinCEN’s website for more information and updates.

The Guide addresses six key questions a company should consider in evaluating compliance with FinCEN’s Reporting Rule:

Does the company need to report its beneficial owners?

Only non-exempt “reporting companies” are required to report BOI to FinCEN under the Reporting Rule.  The Guide explains what qualifies as a reporting company and the twenty-three types of entities that are exempt.  Additionally, the Guide addresses penalties for willful failure to report BOI in the required timeframe.

Who is a beneficial owner of the company?

A beneficial owner is any individual who, directly or indirectly, exercises substantial control over a reporting company or owns or controls at least 25 percent of the ownership interests of a reporting company.  The Guide explains what substantial control and ownership interest are under the Reporting Rule and describes how to identify a company’s beneficial owners and who qualifies for an exemption from the definition of a beneficial owner.

Does the company have to report its company applicants?

Only certain companies that register after January 2024 must report information about their company applicants in BOI reports.  The Guide provides information to help companies determine if they are required to report their company applicants and, if so, who is a company applicant. 

What specific information does the company need to report?

BOI reports require specific information regarding a company, its beneficial owners, and its company applicants.  The Guide describes what information should be collected about a company, its beneficial owners, and its company applicants.  The Guide also outlines what to report if a special reporting rule applies, what a FinCEN identifier is, and how the identifier can be used in the BOI reporting process.

When and how should the company file its initial BOI report?

The Reporting Rule is effective on January 1, 2024, when FinCEN will begin accepting BOI reports electronically through its secure filing system for companies created or registered to do business in the United States on or after January 1, 2024.  Companies created or registered to do business in the United States before January 1, 2024 must submit BOI reports by January 1, 2025.  The Guide explains when a company should file its initial BOI report and how to do so.

On September 27, 2023, FinCEN proposed an amendment to the Reporting Rule that would extend the filing deadline for certain BOI reports. The proposed amendment would extend the filing deadline from 30 days to 90 days for entities created or registered on or after January 1, 2024 and before January 1, 2025. Entities created or registered on or after January 1, 2025 would have 30 days to file their BOI reports with FinCEN, as currently is required.

What should the company do if there are changes or inaccuracies in reported information?

Reporting companies must update and correct information in previously filed BOI reports.  Individuals with FinCEN identifiers must also update and correct information previously reported to FinCEN.  The Guide addresses how to report information changes, what to do in the case of learning of an inaccuracy in a report and what to do if a company becomes exempt or inactive after already filing a report.

Next steps

Companies should review FinCEN’s Guide, updated guidance and regulations to determine whether they will be required to report BOI for any of their entities, and if “yes”, what types of BOI they must report and which company owners, officers, or employees may be required to report their personal information when the Reporting Rule comes into effect. Ensuring compliance will require assessing the whole of your organization and identifying owners, board members, officers, and senior employees who may qualify as beneficial owners.

Parties interested in commenting on the proposed amendment to the Reporting Rule that would extend from 30 to 90 days the deadline for BOI reports for entities created or registered on or after January 1, 2024 and before January 1, 2025 must do so on or before 30 days from publication of the proposed amendment in the Federal Register.

For assistance in preparing for the Reporting Rule or with FinCEN compliance more generally, please reach out to any of the listed Hogan Lovells contacts.

Authored by Liz Boison, Sara Lenet, Beth Peters, Nicholas Sparks, Jane Chen, Nathan Truong, and Andrea Fraser-Reid.