ATTENTION ALL LLC's in the US!
On January 1st, 2024, the United States Department of Treasury's Financial Crimes Enforcement Network (FinCEN) has introduced new Beneficial Ownership Information Reporting Requirements (BOIR) in the United States.
The US Beneficial Ownership reporting requirements have gone into effect as part of the Corporate Transparency Act (CTA) and will impact millions of LLC's and Corporations in the United States.
With very limited exemptions, if you have incorporated or will be incorporating a Corporation or a Limited Liability Company (LLC) in the United States, your entity will have an obligation to file a Beneficial Ownership filing Report (BOIR) with FinCEN.
With civil penalties of up to $10,000 and criminal penalties of up to two (2) years of imprisonment that may be applied to just about every LLC and Corporation in the United States for non-compliance - this new law is stirring up quite the discussion.
WHAT IS A BENEFICIAL OWNER IN THE UNITED STATES?
The definition of Beneficial Owners in the United States alone can make it difficult to for small business owners to accurately comply with this new Federal Reporting Requirements.
A beneficial owner is any individual who, directly or indirectly, (A) owns or controls at least 25% of the ownership interests of a reporting company, or (B) exercises “substantial control” over a reporting company.
The definition of Beneficial Ownership in the United States requires the definition of several other corporate legal terms which we are out of the scope of this introduction to new Beneficial Owner requirements and will be addressed in upcoming articles.
1. “Ownership Interests”
2. “Substantial Control”
BENEFICIAL OWNERSHIP FILING REPORT DEADLINES
If you have incorporated a Corporation or a Limited Liability Company (LLC) in the United States prior to January 1, 2024, your Company will have to file a BOIR with FinCEN by January 1, 2025.
If you incorporate a Company in the United States between January 1, 2024, and January 1, 2025 your company must declare the Beneficial Owner(s) AND Company Applicants to FinCEN within 90 days.
After January 1, 2025, a Company incorporated in the United States will have 30 days to decipher who the entity’s Beneficial Owner(s) AND Company Applicant(s) and report those individuals to FinCEN.
BACKGROUND: THE CORPORATE TRANSPARENCY ACT
The Corporate Transparency Act (CTA) was enacted to combat money laundering, tax evasion, and other financial crimes that exploit shell corporations.
As stated in the CTA, Congress notes that "most or all States do not require information about the beneficial owners of the corporations, limited liability companies, or other similar entities formed under the laws of the State."
Congress concluded that “the Federal Government must set a clear Federal incorporation standard to protect US national security interests and protect interstate and foreign commerce.”
As a result of the CTA, businesses in the United States must now file their Beneficial Owners and Company Applicants to FinCen within a limited timeframe.
CIVIL AND CRIMINAL PENALTIES
The Civil and Criminal penalties for failure to file a BOIR or amending a BOIR within 30 days when required by law are very severe. The willful failure to file or update a BOIR report by the applicable deadlines could result in:
- Civil penalties of $500 per day of up to $10,000.
- Criminal penalties include imprisonment of up to two years.
Della Torre Law, PLLC