Memo – Small Business Owners – URGENT – Corporate Transparency Act (CTA) – Beneficial Ownership Information (BOI) – Closely Held Companies Have New FinCEN Reporting Requirements

Beneficial ownership information refers to identifying information about the individuals who directly or indirectly own or control a company.

[Issued March 24, 2023]

In 2021, Congress passed the Corporate Transparency Act on a bipartisan basis. This law creates a new beneficial ownership information reporting requirement as part of the U.S. government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.

[Issued September 18, 2023]

FinCEN will permit Federal, State, local, and Tribal officials, as well as certain foreign officials who submit a request through a U.S. Federal government agency, to obtain beneficial ownership information for authorized activities related to national security, intelligence, and law enforcement. Financial institutions will also have access to beneficial ownership information in certain circumstances, with the consent of the reporting company. Those financial institutions’ regulators will also have access to beneficial ownership information when they supervise the financial institutions.

FinCEN is developing the rules that will govern access to and handling of beneficial ownership information. Beneficial ownership information reported to FinCEN will be stored in a secure, non-public database using rigorous information security methods and controls typically used in the Federal government to protect non-classified yet sensitive information systems at the highest security level. FinCEN will work closely with those authorized to access beneficial ownership information to ensure that they understand their roles and responsibilities to ensure that the reported information is used only for authorized purposes and handled in a way that protects its security and confidentiality.

[Issued September 18, 2023]

No. No one needs to report beneficial ownership information to FinCEN until January 1, 2024. FinCEN is currently not accepting any beneficial ownership information reports.

[Issued March 24, 2023]

A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial beneficial ownership information report.

A reporting company created or registered on or after January 1, 2024, will have 30 days to file its initial beneficial ownership information report. This 30-day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.

[Issued March 24, 2023]

FinCEN will begin accepting beneficial ownership information reports on January 1, 2024. Beneficial ownership information reports will not be accepted before then.

[Issued March 24, 2023]

No. There will be no fee for submitting your beneficial ownership information report to FinCEN.

[Issued March 24, 2023]

If you are required to report your company’s beneficial ownership information to FinCEN, you will do so electronically through a secure filing system available via FinCEN’s website. This system is currently being developed and will be available before your report must be filed.

[Issued March 24, 2023]

The form to report beneficial ownership information is not yet available. Once available, information about the form will be posted on FinCEN’s beneficial ownership information webpage.

[Issued September 18, 2023]

Companies required to report are called reporting companies. There are two types of reporting companies:

• Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
• Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.

There are 23 types of entities that are exempt from the reporting requirements (see Question C.2). Carefully review the qualifying criteria before concluding that your company is exempt.

FinCEN’s Small Entity Compliance Guidefor beneficial ownership information reporting includes the following flowchart to help identify if a company is a reporting company (see Chapter 1.1, “Is my company a “reporting company”?”).

[Issued September 18, 2023]

Yes, 23 types of entities are exempt from the beneficial ownership information reporting requirements. These entities include publicly traded companies meeting specified requirements, many nonprofits, and certain large operating companies.

The following table summarizes the 23 exemptions:

FinCEN’s Small Entity Compliance Guide includes this table and checklists for each of the 23 exemptions that may help determine whether a company meets an exemption (see Chapter 1.2, “Is my company exempt from the reporting requirements?”). Companies should carefully review the qualifying criteria before concluding that they are exempt. Please see additional FAQs about reporting company exemptions in “L. Reporting Company Exemptions” below.

[Issued September 18, 2023]

A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control (see Question D.2) over the reporting company, or (2) owns or controls at least 25% of the reporting company’s ownership interests (see Question D.4).

FinCEN’s Small Entity Compliance Guide provides checklists and examples that may assist in identifying beneficial owners (see Chapter 2.3 “What steps can I take to identify my company’s beneficial owners?”).

[Issued September 18, 2023]

An individual can exercise substantial control over a reporting company in four different ways. If the individual falls into any of the categories below, the individual is exercising substantial control:

• The individual is a senior officer (the company’s president, chief financial officer, general counsel, chief executive office, chief operating officer, or any other officer who performs a similar function).
• The individual has authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company.
• The individual is an important decision-maker for the reporting company. See Question D.3 for more information.
• The individual has any other form of substantial control over the reporting company as explained further in FinCEN’s Small Entity Compliance Guide (see Chapter 2.1, “What is substantial control?”).

[Issued September 18, 2023]

Important decisions include decisions about a reporting company’s business, finances, and structure. An individual that directs, determines, or has substantial influence over these important decisions exercises substantial control over a reporting company. Chapter 2.1, “What is substantial control?” of FinCEN’s Small Entity Compliance Guide provides the following information:

[Issued September 18, 2023]

An ownership interest is generally an arrangement that establishes ownership rights in the reporting company. Examples of ownership interests include shares of equity, stock, voting rights, or any other mechanism used to establish ownership.

Chapter 2.2, “What is ownership interest?” of FinCEN’s Small Entity Compliance Guide discusses ownership interests and sets out steps to assist in determining the percentage of ownership interests held by an individual.

[Issued September 18, 2023]

There are five instances in which an individual who would otherwise be a beneficial owner of a reporting company qualifies for an exception. In those cases, the reporting company does not have to report that individual as a beneficial owner to FinCEN.

FinCEN’s Small Entity Compliance Guide includes a checklist to help determine whether any exceptions apply to individuals who might otherwise qualify as beneficial owners (see Chapter 2.4. “Who qualifies for an exception from the beneficial owner definition?”).

[Issued September 18, 2023]

Accountants and lawyers generally do not qualify as beneficial owners, but that may depend on the work being performed.

Accountants and lawyers who provide general accounting or legal services are not considered beneficial owners because ordinary, arms-length advisory or other third-party professional services to a reporting company are not considered to be “substantial control” (see Question D.2). In addition, a lawyer or accountant who is designated as an agent of the reporting company may quality for the “nominee, intermediary, custodian, or agent” exception from the beneficial owner definition.

However, an individual who holds the position of general counsel in a reporting company is a “senior officer” of that company and is therefore a beneficial owner. FinCEN’s Small Entity Compliance Guide includes a checklist to help determine whether an individual qualifies for an exception to the beneficial owner definition (see Chapter 2.4, “Who qualifies for an exception from the beneficial owner definition?”).

[Issued September 18, 2023]

If a beneficial owner owns or controls their ownership interests in a reporting company exclusively through multiple exempt entities, then the names of all of those exempt entities may be reported to FinCEN instead of the individual beneficial owner’s information.

• Note that this special rule does not apply when an individual owns or controls ownership interests in a reporting company through both exempt and non-exempt entities. In that case, the reporting company must report the individual as a beneficial owner (if no exception applies), but the exempt companies do not need to be listed.

FinCEN’s Small Entity Compliance Guide includes more information about this special reporting rule in Chapter 4.2, “What do I report if a special reporting rule applies to my company?”

[Issued September 29, 2023]

The unaffiliated company itself cannot be a beneficial owner of the reporting company because a beneficial owner must be an individual. Any individuals that exercise substantial control over the reporting company through the unaffiliated company must be reported as beneficial owners of the reporting company. However, individuals who do not direct, determine, or have substantial influence over important decisions made by the reporting company, and do not otherwise exercise substantial control, may not be beneficial owners of the reporting company.

Please see Chapter 2.1 of FinCEN’s Small Entity Compliance Guide, “What is substantial control?” for additional information on how to determine whether an individual has substantial control over a reporting company.

[Issued September 29, 2023]

No.  A beneficial owner of a company is any individual who, directly or indirectly, exercises substantial control over a reporting company, or who owns or controls at least 25 percent of the ownership interests of a reporting company.

Whether a particular director meets any of these criteria is a question that the reporting company must consider on a director-by-director basis.

FinCEN’s Small Entity Compliance Guide includes additional information on how to determine if an individual qualifies as a beneficial owner in Chapter 2, “Who is a beneficial owner of my company?”. This chapter includes separate sections with more information about substantial control and ownership interest: Chapter 2.1 “What is substantial control?” and Chapter 2.2 “What is ownership interest?”

[Issued September 29, 2023]

Only reporting companies created or registered on or after January 1, 2024, will need to report their company applicants.

A company that must report its company applicants will have only up to two individuals who could qualify as company applicants:

1. The individual who directly files the document that creates or registers the company; and
2. If more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing.

The following flowchart can help identify the company applicant.

In addition, Chapter 3.2, “Who is a company applicant of my company?” of FinCEN’s Small Entity Compliance Guide includes additional information to help identify company applicants.

[Issued September 18, 2023]

Not all reporting companies have to report their company applicants to FinCEN.

A reporting company must report its company applicants only if it is either a:

• Domestic reporting company created in the United States on or after January 1, 2024; or
• Foreign reporting company first registered to do business in the United States on or after January 1, 2024.

A reporting company does not have to report its company applicants if it is either a:

• Domestic reporting company created in the United States before January 1, 2024; or
• Foreign reporting company first registered to do business in the United States before January 1, 2024.

Below is summary of the company applicant reporting requirement. Chapter 3.1, “Is my company required to report its company applicants?” of FinCEN’s Small Entity Compliance Guide includes additional information.

[Issued September 18, 2023]

An accountant or lawyer could be a company applicant, depending on their role in filing the document that creates or registers a reporting company. In many cases, company applicants may work for a business formation service or law firm.

An accountant or lawyer may be a company applicant if they directly filed the document that created or registered the reporting company. If more than one person is involved in the filing of the creation or registration document, an accountant or lawyer may be a company applicant if they are primarily responsible for directing or controlling the filing.

For example, an attorney at a law firm that offers business formation services may be primarily responsible for overseeing preparation and filing of a reporting company’s incorporation documents. A paralegal at the law firm may directly file the incorporation documents at the attorney’s request. Under those circumstances, the attorney and the paralegal are both company applicants for the reporting company.

[Issued September 18, 2023]

Yes. The information that needs to be reported, however, depends on when the company was created or registered.

• If a reporting company is created or registered on or after January 1, 2024, the reporting company will need to report information about itself, its beneficial owners, and its company applicants.
• If a reporting company was created or registered before January 1, 2024, the reporting company only needs to provide information about itself and its beneficial owners. The reporting company does not need to provide information about its company applicants.

[Issued March 24, 2023]

A reporting company will have to report:

1. Its legal name;
2. Any trade names, “doing business as” (d/b/a), or “trading as” (t/a) names;
3. The current street address of its principal place of business if that address is in the United States (for example, a U.S. reporting company’s headquarters), or, for reporting companies whose principal place of business is outside the United States, the current address from which the company conducts business in the United States (for example, a foreign reporting company’s U.S. headquarters);
4. Its jurisdiction of formation or registration; and
5. Its Taxpayer Identification Number (or, if a foreign reporting company has not been issued a TIN, a tax identification number issued by a foreign jurisdiction and the name of the jurisdiction).

A reporting company will also have to indicate whether it is filing an initial report, or a correction or an update of a prior report.

FinCEN’s Small Entity Compliance Guide includes a checklist to help identify the information required to be reported (see Chapter 4.1, “What information should I collect about my company, its beneficial owners, and its company applicants?”).

[Issued September 18, 2023]

For each individual who is a beneficial owner, a reporting company will have to provide:

1. The individual’s name;
2. Date of birth;
3. Residential address; and
4. An identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of identification document (for examples of acceptable identification, see Question F.5).

The reporting company will also have to report an image of the identification document used to obtain the identifying number in item 4.

FinCEN’s Small Entity Compliance Guide includes a checklist to help identify the information required to be reported (see Chapter 4.1, “What information should I collect about my company, its beneficial owners, and its company applicants?”).

[Issued September 18, 2023]

For each individual who is a company applicant, a reporting company will have to provide:

1. The individual’s name;
2. Date of birth;
3. Address; and
4. An identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of identification document (for examples of acceptable identification, see Question F.5).

The reporting company will also have to report an image of the identification document used to obtain the identifying number in item 4.

If the company applicant works in corporate formation—for example, as an attorney or corporate formation agent—then the reporting company must report the company applicant’s business address. Otherwise, the reporting company must report the company applicant’s residential address.

FinCEN’s Small Entity Compliance Guide includes a checklist to help identify the information required to be reported (see Chapter 4.1, “What information should I collect about my company, its beneficial owners, and its company applicants?”).

[Issued September 18, 2023]

The only acceptable forms of identification are:

1. A non-expired U.S. driver’s license (including any driver’s licenses issued by a commonwealth, territory, or possession of the United States);
2. A non-expired identification document issued by a U.S. state or local government, or Indian Tribe;
3. A non-expired passport issued by the U.S. government; or
4. A non-expired passport issued by a foreign government (only when an individual does not have one of the other three forms of identification listed above).

[Issued September 18, 2023]

If your company existed before January 1, 2024, it must file its initial beneficial ownership information report by January 1, 2025.

If your company is created or registered to do business in the United States on or after January 1, 2024, then it must file its initial beneficial ownership information report within 30 days after receiving actual or public notice that its creation or registration is effective. The following sets out the initial report timelines.

Chapter 5.1 “When should my company file its initial BOI report?” of FinCEN’s Small Entity Compliance Guide has additional information about the reporting timelines.

[Issued September 18, 2023]

No. Any company that meets the definition of a reporting company and is not exempt is required to file its own BOI report.

[Issued September 29, 2023]

If there is any change to the required information about your company or its beneficial owners in a beneficial ownership information report that your company filed, your company must file an updated report no later than 30 days after the date of the change.

A reporting company is not required to file an updated report for any changes to previously reported information about a company applicant.

The following infographic sets out updated reports timelines.

Chapter 6.1, “What should I do if previously reported information changes?” of FinCEN’s Small Entity Compliance Guide provides additional information.

[Issued September 18, 2023]

The following are some examples of the changes that would require an updated beneficial ownership information report:

• Any change to the information reported for the reporting company, such as registering a new business name.
• A change in beneficial owners, such as a new CEO, or a sale that changes who meets the ownership interest threshold of 25 percent (see Question D.4 for more information about ownership interests).
• Any change to a beneficial owner’s name, address, or unique identifying number previously provided to FinCEN. If a beneficial owner obtained a new driver’s license or other identifying document that includes a changed name, address, or identifying number, the reporting company also would have to file an updated beneficial ownership information report with FinCEN, including an image of the new identifying document.

FinCEN’s Small Entity Compliance Guide provides additional guidance on triggers requiring an updated beneficial ownership information report (see Chapter 6.1 “What should I do if previously reported information changes?”).

[Issued September 18, 2023]

If a beneficial ownership information report is inaccurate, your company must correct it no later than 30 days after the date your company became aware of the inaccuracy or had reason to know of it. This includes any inaccuracy in the required information provided about your company, its beneficial owners, or its company applicants. The following infographic sets out the corrected report timelines.

Chapter 6.2, “What should I do if I learn of an inaccuracy in a report?” of FinCEN’s Small Entity Compliance Guide includes additional information about correcting inaccurate beneficial ownership information reports filed with FinCEN.

[Updated September 29, 2023]

If a reporting company filed a beneficial ownership information report but then becomes exempt from filing the report, the company should file an updated report indicating that it is no longer a reporting company. An updated BOI report for a newly exempt entity will only require that: (1) the entity identify itself; and (2) check a box noting its newly exempt status. Chapter 6.3, “What should my company do if it becomes exempt after already filing a report?” of FinCEN’s Small Entity Compliance Guide includes more information.

[Issued September 18, 2023]

FinCEN is working hard to ensure that reporting companies are aware of their obligations to report, update, and correct beneficial ownership information. FinCEN understands this is a new requirement. If you correct a mistake or omission within 90 days of the deadline for the original report, you may avoid being penalized. However, you could face civil and criminal penalties if you disregard your beneficial ownership information reporting obligations.

FinCEN’s Small Entity Compliance Guide provides more information about enforcement of the requirement (see Chapter 1.3, “What happens if my company does not report BOI in the required timeframe?”).

[Issued September 18, 2023]

An entity qualifies for the tax-exempt entity exemption if any of the following four criteria apply:

FinCEN’s Small Entity Compliance Guide includes checklists for this exemption (see exemption #19) and for the additional exemptions to the reporting requirements (see Chapter 1.2, “Is my company exempt from the reporting requirements?”).

[Issued September 29, 2023]

An entity qualifies for the inactive entity exemption if all six of the following criteria apply:

FinCEN’s Small Entity Compliance Guide includes checklists for this exemption (see exemption #23) and for the additional exemptions to the reporting requirements (see Chapter 1.2, “Is my company exempt from the reporting requirements?”).

[Issued September 18, 2023]

Subsidiaries of certain types of entities that are exempt from the beneficial ownership information reporting requirements may also be exempt from the reporting requirement.

An entity qualifies for the subsidiary exemption if the following applies:

FinCEN’s Small Entity Compliance Guide includes definitions of the exempt entities listed above and a checklist for this exemption (see exemption #22). FinCEN’s Guide also includes checklists for the additional exemptions to the reporting requirements (see Chapter 1.2, “Is my company exempt from the reporting requirements?”).

[Issued September 18, 2023]

A “FinCEN identifier” is a unique identifying number that FinCEN will issue to an individual or reporting company upon request after the individual or reporting company provides certain information to FinCEN. An individual or reporting company may only receive one FinCEN identifier.

FinCEN’s Small Entity Compliance Guide includes additional information on FinCEN identifiers in Chapter 4.3, “What is a FinCEN identifier and how can I use it?”

[Issued September 29, 2023]

When an individual who is a beneficial owner or company applicant has obtained a FinCEN identifier, reporting companies may report the FinCEN identifier of that individual in the place of that individual’s otherwise required personal information on a beneficial ownership information report.

The use of FinCEN identifiers obtained by reporting companies is the subject of ongoing rulemaking. FinCEN anticipates providing additional guidance when that rulemaking is finalized.

[Issued September 29, 2023]

Individuals will be able to request a FinCEN identifier on or after January 1, 2024, by completing an electronic web form. Individuals will need to provide their full legal name, date of birth, address, unique identifying number and issuing jurisdiction from an acceptable identification document, and an image of the identification document. After an individual submits this information, the individual will immediately receive a FinCEN identifier unique to that individual.

Reporting companies may request a FinCEN identifier by checking a box on the beneficial ownership information report when they submit the report. After the reporting company submits the report, the reporting company will immediately receive a FinCEN identifier unique to that company. If a reporting company wishes to request a FinCEN identifier after submitting its initial beneficial ownership report, it may submit an updated beneficial ownership information report requesting a FinCEN identifier, even if the company does not otherwise need to update its information.

[Issued September 29, 2023]

No. An individual or reporting company is not required to obtain a FinCEN identifier.

[Issued September 29, 2023]

Yes. Individuals must update or correct information through the FinCEN identifier application that is also used to request a FinCEN identifier.

• Individuals must report any change to the information they submitted to obtain a FinCEN identifier no later than 30 days after the date on which the change occurred.
• If there is any inaccuracy in this information, an individual must correct the information no later than 30 days after the date the individual became aware of the inaccuracy or had reason to know of it.

Reporting companies with a FinCEN identifier must update or correct the company’s information by filing an updated or corrected beneficial ownership information report, as appropriate.

[Issued September 29, 2023]

FinCEN is actively assessing options to allow individuals to deactivate a FinCEN identifier so that they do not need to update the underlying personal information on an ongoing basis. FinCEN will provide additional guidance on this functionality upon completion of that process.

[Issued September 29, 2023]

Yes. Reporting companies may use third-party service providers to submit beneficial ownership information reports. Third-party service providers will have the ability to submit the reports via FinCEN’s E-Filing system and/or an Application Programming Interface (API). Technical specifications for the API will be made available at a later date.