The New Beneficial Ownership Reporting Rule: A Guide For Small Businesses
Attention, small and medium-sized businesses! The Beneficial Ownership Information Reporting Rule (BOI Rule) of the Financial Crimes Enforcement Network of the U.S. Treasury (FinCEN) takes effect in January 2024. The BOI Rule will bring significant changes to company transparency and reporting obligations. FinCEN has released a detailed FAQ about the new regulation. We have provided a summary below with information businesses should be aware of concerning the BOI Rule.
What is the BOI Rule?
The BOI Rule requires companies such as corporations, limited liability companies, and other entities created by a filing with a secretary or state, to report information about their beneficial owners. The rule aims to enhance financial crime prevention and market integrity by shedding light on the true decision-makers behind businesses.
Who is a beneficial owner?
Beneficial owners under the BOI Rule are individuals or entities who (1) exercise substantial control over the company; or (2) own or control at least 25% of the company’s ownership interests.
Beneficial owners who exercise substantial control include senior officers (e.g. C-Suite executives); anyone with the ability to appoint or remove a senior officer; and other important decision makers.
Does it apply to my business?
The BOI Rule applies to most businesses, with limited exemptions. However, the deadline for reporting beneficial ownership varies depending on when the business was formed or registered:
Companies formed or registered after January 1, 2024, must report their initial beneficial ownership information within 90 days of formation or registration.
Companies formed or registered before January 1, 2024, have until January 1, 2025, to report their initial beneficial ownership information.
Companies formed or registered after January 1, 2025, must report their initial beneficial ownership information within 30 days of formation or registration.
What information needs to be reported?
The rule requires identifying and reporting the following details about beneficial owners:
Name;
Date of birth;
Complete current address;
Unique identifying number and image of a U.S. passport or State driver’s license.
What should businesses do now?
FinCEN is expected to release an electronic filing system in early 2024. We will post an update when that happens. Even though the filing system is not available yet, business owners should not wait to start the process of complying with the BOI Rule. Instead, consult with your legal counsel now to discuss your specific needs and ensure a smooth transition to BOI Rule compliance. Depending on the structure of a business, the BOI Rule can be complex and it is an evolving regulation. Seeking legal guidance now can help businesses navigate the requirements efficiently and minimize potential mistakes.
If you have questions about your business’ BOI Rule reporting obligations, please schedule a complimentary consultation with us through our online scheduling system.
Information contained in this blog is provided for informational purposes and does not constitute legal advice or opinion. You should consult with an attorney regarding the specifics of your matter or legal issue.