The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) finalized a rule last month to extend the deadline for companies created or registered in 2024 to file their initial beneficial ownership information reports. The rule will require most U.S. corporations, limited liability companies, and other entities created in or registered to do business in the U.S. to report information about their beneficial owners—the persons who ultimately own or control the company—to FinCEN.
With the most recent amendment, the reporting deadline for companies created or registered in 2024 is extended to 90 days from the receipt of public notice of their registration instead of the 30 days initially proposed.
What are the important dates and deadlines for reporting?
This new ruling will go into effect on January 1, 2024.
- Companies that existed before January 1, 2024 will have one year to submit their first report (by January 1, 2025).
- Companies created or registered after January 1, 2024 and through the end of the year will now have 90 days to submit their first report after they are established.
- Companies created or registered on or after January 1, 2025 will still only have 30 calendar days to submit their first report after they are established.
Additionally, after submitting the initial report, all companies will have to update the information about their owners within 30 days of any changes.
Who is considered a “beneficial owner”?
In general, a beneficial owner is any individual (1) who directly or indirectly exercises “substantial control” over the reporting company, or (2) who directly or indirectly owns or controls 25 percent or more of the “ownership interests” of the reporting company.
Whether an individual has “substantial control” over a reporting company depends on the power they may exercise over a reporting company. For example, an individual will have substantial control of a reporting company if they direct, determine, or exercise substantial influence over, important decisions the reporting company makes. In this regard, any senior officer is deemed to have substantial control over a reporting company. The ownership interests can include simple things like regular shares of stock or more complicated arrangements. According to FinCEN, they expect the majority of companies to have straightforward ownership structures.
What companies will be required to report?
Certain companies—referred to as “reporting companies”—will be required to report their beneficial ownership information to FinCEN.
A domestic reporting company is defined as:
- a corporation,
- a limited liability company, or
- any other entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.
A foreign reporting company is any entity that is…
- a corporation, limited liability company, or other entity formed under the law of a foreign country, AND
- registered to do business in any U.S. state or in any Tribal jurisdiction, by the filing of a document with a secretary of state or any similar office under the law of a U.S. state or Indian tribe.
If you had to file a document with a state or Indian Tribal-level office to create your company or to register it to do business if it is a foreign company, then your company is most likely a reporting company, barring any applicable exemptions.
For the definitions of both domestic and foreign reporting companies, a “state” means any state of the U.S., the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, Guam, the U.S. Virgin Islands, and any other commonwealth, territory, or possession of the U.S.
However, if an entity qualifies for one of the 23 exemptions in the Corporate Transparency Act, they will not be considered a reporting company, and therefore not required to file a report. This includes banks, credit unions, and more. (Note: A full list of exemptions can be found here. If you would like to discuss these exemptions and determine qualification, please contact us today.)
What information will companies have to report?
A reporting company will have to report:
- Its legal name;
- Any trade names, “doing business as” (d/b/a), or “trading as” (t/a) names;
- The current street address of its principal place of business if that address is in the United States (for example, a domestic reporting company’s headquarters), or, for reporting companies whose principal place of business is outside the U.S., the current address from which the company conducts business in the U.S. (for example, a foreign reporting company’s U.S. headquarters);
- Its jurisdiction of formation or registration; and
- Its Taxpayer Identification Number (“TIN”).
A reporting company will also have to indicate the type of filing it is making (that is, whether it is filing an initial report, a correction of a prior report, or an update to a prior report).
We’re here to help
Although reporting will begin in January 2024, there is not yet a landing page on FinCEN’s website to do so. Once it is launched and operational, you will report your company’s beneficial ownership information electronically through a secure filing system available there.
If you would like to understand more about this filing or its qualifications, or you’d like to inquire about exemptions, contact us today. As with any new ruling, we encourage you to reach out to your tax advisor with any questions or concerns you may have.
By Fernando Lopez, International Tax Services Partner
