FinCEN Beneficial Ownership Information

If you are a small business owner, you just had another chore added to your list. After years of delays, the first stage of the Corporate Transparency Act (CTA) goes into effect on January 1, 2024. It imposes a new federal filing requirement for most corporations and limited liability companies (LLCs) with very few exceptions. 99% of the small business owners out there must complete FinCEN’s Beneficial Ownership Information filing. See FinCen FAQs here:

The CTA’s purpose is to prevent the use of anonymous shell companies for money laundering, tax evasion, and other illegal purposes. Just like any rule or law, it casts a wide net and generally inconveniences the vast majority just to find a few bad people. Then again, if you a bad person you likely don’t care about laws, rules and fines so some of this is just window-dressing.

Also, before you lose your mind and start looking at property on Mars, banks have been doing a version of this for years. Lots of years. Some businesses are exempt, including-

  • sole proprietors (those who have not created an entity with the Secretary of State)
  • large businesses—businesses with more than 20 full-time employees and $5 million in receipts on their prior-year tax return,
  • certain businesses already heavily regulated by the government, such as banks and insurance companies,
  • nonprofits, and
  • several others.

The CTA’s purpose is to compile a massive government database containing the identities and contact information of the “beneficial owners” of most types of business entities. Beneficial owners are the humans who own or exercise substantial control over the entity.

For most reporting companies, identifying the beneficial owners is simple. For example, a three-member LLC in which each member has a one-third ownership interest has three beneficial owners. Identifying beneficial owners for reporting companies with complex ownership structures can be more difficult.

Here’s what happens if you form a new LLC or corporation in 2024. Within 90 days of formation, you must file the beneficial owner information report with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN)—the Treasury Department’s financial intelligence unit. The report must contain the following for each beneficial owner:

  • Full legal name
  • Date of birth
  • Complete current residential street address
  • A unique identifying number from a current U.S. passport, state or local ID document, driver’s license, or foreign passport
  • An image of the document that contains the unique identifying number

You must provide similar information for the people who filed the documents to form the entity, such as the articles of incorporation or articles of organization for an LLC.

The beneficial owner information report is filed online at a new federal database called BOSS (an acronym for Beneficial Ownership Secure System). You can’t file until January 1, 2024. You don’t pay any filing fees. The information in the BOSS database is strictly for use by law enforcement, the IRS, and other government agencies. FinCEN does not disclose the BOSS information to the public. Read that again. If you’ve created entity structures for anonymity, then that is preserved.

BOSS reporting is separate from your state and local filings when forming a new business entity. But from now on, filing the BOSS report must become a routine part of creating most new business entities.

This is no joke. Failure to comply (or softly put, “non-compliance”) is $500 per day up to $10,000.

Additional quick thoughts-

  • Rental properties held in an LLC must comply and file (eye roll, we get it, but it is what it is)
  • If you own or control 25% or more of a “reporting company,” you are deemed a beneficial owner, and the information above must be supplied (excluding minor children)
  • Businesses formed in 2024 have 90 days (was 30 days), and businesses that exist prior to 2024 have 1 year to comply
  • Compliance is a one-and-done situation unless the beneficial ownership changes (and then you have 30 days to file the update)