Beneficial Ownership Information Report: New Filing Requirements

The business landscape has undergone significant changes with the introduction of the Corporate Transparency Act (CTA), which mandates new reporting requirements for millions of U.S. businesses. Starting January 1, 2024, most small and mid-sized companies must file a beneficial ownership report with the Financial Crimes Enforcement Network (FinCEN). This requirement represents one of the most significant compliance changes for businesses in recent years.

What Is a Beneficial Ownership Information Report?

A beneficial ownership information report is a federal filing that discloses information about individuals who ultimately own or control a company. This report must be submitted to FinCEN, a bureau of the U.S. Department of Treasury, as part of efforts to combat money laundering, terrorism financing, and other illicit activities.

The requirement affects approximately 32 million existing businesses and all newly formed entities going forward. If you operate an LLC, corporation, or other business entity formed by filing documents with a state, you likely need to comply with this new federal mandate.

Who Needs to Comply

Reporting Companies

Most businesses formed in the United States must file beneficial ownership reports, including:

• Limited Liability Companies (LLCs)
• Corporations (C-Corps and S-Corps)
• Limited partnerships that file formation documents with states
• Other entities created by filing with state authorities

Exemptions

Certain businesses are exempt from filing requirements, including:

• Large operating companies with more than 20 full-time U.S. employees, over $5 million in gross receipts, and a physical U.S. office
• Publicly traded companies subject to SEC reporting requirements
• Regulated entities such as banks, credit unions, and investment companies
• Governmental authorities
• Certain nonprofits with 501(c) status
• Inactive entities with specific characteristics

Requirements Overview

Information Required

Beneficial ownership reports must include detailed information about:

Company Information:

• Legal name and any trade names (DBAs)
• Business address
• State or jurisdiction of formation
• Taxpayer identification number

Beneficial Owner Information:

• Full legal name
• Date of birth
• Current residential address
• Unique identifying number from acceptable identification documents
• Image of the identification document

Who Qualifies as a Beneficial Owner

A beneficial owner is any individual who:

1. Owns 25% or more of the ownership interests in the company
2. Exercises substantial control over the company through:
– Senior officer positions (president, CEO, CFO, general counsel, etc.)
– Authority to make important decisions
– Other forms of substantial control

Company Applicants

For entities formed after January 1, 2024, reports must also include information about “company applicants” – individuals who directly file formation documents or direct someone else to file them.

Deadlines and Timing

Existing Companies

Companies formed before January 1, 2024, have until January 1, 2025 to file their initial beneficial ownership report.

New Companies

Companies formed on or after January 1, 2024, have different deadlines:

• Formed in 2024: 90 calendar days from formation
• Formed in 2025 and beyond: 30 calendar days from formation

Updates

Companies must file updated reports within 30 days of any changes to previously reported information, including:

• Changes in beneficial ownership
• New beneficial owners
• Changes in beneficial owner information
• Changes in company information

Step-by-Step Filing Process

Step 1: Determine Filing Requirement

First, confirm whether your business needs to file by reviewing the exemption criteria. If you don’t qualify for an exemption, proceed with gathering required information.

Step 2: Identify Beneficial Owners

Determine all individuals who meet the beneficial ownership criteria:

• Calculate ownership percentages
• Identify individuals with substantial control
• Gather their required personal information

Step 3: Collect Required Documents

For each beneficial owner, obtain:

• Driver’s license or state-issued ID
• U.S. passport
• Or other acceptable identification documents

Step 4: Access FinCEN’s Filing System

Reports must be filed electronically through FinCEN’s Beneficial Ownership Secure System (BOSS) at fincen.gov. The system requires:

• Account creation
• Secure login credentials
• Document upload capabilities

Step 5: Complete and Submit Report

Fill out all required fields accurately and upload identification documents. Review thoroughly before submission, as false information can result in severe penalties.

Step 6: Maintain Records

Keep copies of filed reports and supporting documentation. Establish systems for tracking changes that require updated filings.

State Variations and Considerations

Federal Requirement with State Formation

While beneficial ownership reporting is a federal requirement, it applies to entities formed under state law. The type of entity and formation state don’t affect the federal filing requirement, but they may influence:

Entity Type Considerations:

• LLCs: Operating agreements may affect ownership calculations
• Corporations: Share structures impact percentage ownership
• Partnerships: Partnership agreements determine control structures

Multi-State Operations

Companies operating in multiple states must still file a single federal report, but should consider:

• Where the entity was originally formed
• State-specific beneficial ownership definitions in operating documents
• Varying state privacy laws that may affect disclosure preferences

State-Level Beneficial Ownership Laws

Some states have their own beneficial ownership requirements separate from federal mandates. Companies should review state-specific obligations in addition to federal requirements.

Consequences of Non-Compliance

Civil Penalties

Failure to file required beneficial ownership reports can result in:

• Fines up to $500 per day the violation continues
• Maximum civil penalty of $10,000 per violation

Criminal Penalties

Willful violations may result in criminal charges including:

• Fines up to $10,000
• Imprisonment up to two years
• Both fines and imprisonment

Business Implications

Beyond direct penalties, non-compliance can affect:

• Banking relationships as financial institutions may require compliance verification
• Investment opportunities as investors conduct enhanced due diligence
• Business partnerships with compliance-focused organizations
• Government contracting opportunities

Remedying Non-Compliance

If you’ve missed filing deadlines:

1. File immediately to minimize ongoing daily penalties
2. Document remedial actions taken to achieve compliance
3. Implement systems to prevent future violations
4. Consider legal counsel for significant violations
5. Review and update all company information for accuracy

Best Practices for Compliance

Establish Compliance Systems

Create Filing Calendars:

• Mark initial filing deadlines
• Schedule periodic ownership reviews
• Set reminders for common trigger events

Document Ownership Structure:

• Maintain current ownership records
• Document control arrangements
• Update operating agreements and bylaws regularly

Implement Change Management

Monitor Trigger Events:

• Ownership transfers or sales
• Changes in management structure
• Address changes for beneficial owners
• Updates to identification documents

Establish Update Procedures:

• Designate responsible parties for monitoring changes
• Create workflows for gathering updated information
• Set 30-day update deadlines in internal calendars

Maintain Privacy and Security

Protect Sensitive Information:

• Limit access to beneficial ownership data
• Use secure systems for storing identification documents
• Implement data retention policies

Consider Privacy Implications:

• Understand that FinCEN data isn’t public but may be accessible to law enforcement
• Review state privacy laws
• Communicate privacy protections to beneficial owners

Record Keeping

Maintain Comprehensive Records:

• Copies of all filed reports
• Supporting documentation
• Change tracking logs
• Correspondence with FinCEN

Regular Reviews:

• Conduct quarterly ownership reviews
• Annual compliance audits
• Update procedures as regulations evolve

Getting Professional Help

When to Use Professional Services

Consider professional assistance if your business has:

• Complex ownership structures with multiple entities or trusts
• Frequent ownership changes requiring regular updates
• Multi-state operations with varying compliance requirements
• Limited internal resources for compliance management
• Risk-averse approach requiring expert guidance

Types of Professional Assistance

Legal Counsel:

• Complex entity structures
• Compliance violations
• Regulatory interpretation

Compliance Services:

• Filing preparation and submission
• Ongoing monitoring systems
• Change management processes

Accounting Professionals:

• Ownership calculation assistance
• Integration with financial reporting
• Tax implication guidance

How TrustedLegal Can Help

TrustedLegal.com has helped thousands of entrepreneurs navigate complex business compliance requirements. Our experienced team understands the intricacies of beneficial ownership reporting and can provide:

Comprehensive Compliance Support:

• Initial filing assistance
• Ongoing monitoring services
• Update filing management
• Expert guidance on complex situations

Integrated Business Services:

• Entity formation with compliance planning
• registered agent services
• Annual report filing
• Complete business compliance solutions

Our affordable pricing, fast turnaround, and expert support ensure your business stays compliant while you focus on growth and operations.

Frequently Asked Questions

1. Do single-member LLCs need to file beneficial ownership reports?

Yes, most single-member LLCs must file beneficial ownership reports unless they qualify for an exemption. The single member would typically be reported as both an owner (holding 100% ownership) and as exercising substantial control over the entity.

2. What happens if a beneficial owner dies or becomes incapacitated?

You must file an updated report within 30 days reflecting changes in beneficial ownership. This may involve reporting new beneficial owners if ownership transfers to heirs or other parties, or removing the deceased individual from the report.

3. Are there exemptions for family-owned businesses?

There are no specific exemptions for family-owned businesses. However, family businesses may qualify for the large operating company exemption if they meet the criteria (20+ employees, $5+ million gross receipts, physical U.S. office).

4. How do trust structures affect beneficial ownership reporting?

When beneficial ownership is held through trusts, you generally report the individual trustees, beneficiaries, or other individuals who ultimately exercise control over the trust interests. Complex trust structures may require legal guidance to determine proper reporting.

5. Can I file amendments to correct mistakes in previous reports?

Yes, you can file updated reports to correct errors in previously submitted information. However, it’s crucial to file corrections promptly to minimize potential penalties for inaccurate reporting.

Conclusion

The beneficial ownership information reporting requirement represents a significant new compliance obligation for millions of U.S. businesses. While the requirements may seem complex, understanding the deadlines, processes, and best practices helps ensure smooth compliance and avoids costly penalties.

Successful compliance requires ongoing attention to ownership changes, systematic record-keeping, and proactive filing management. For many businesses, professional assistance provides valuable peace of mind and ensures accurate, timely compliance.

Ready to start your business journey with confidence? TrustedLegal.com offers comprehensive business formation and compliance services to help you establish and maintain your LLC, corporation, or nonprofit organization. Our affordable pricing, fast filing, and expert support team guide you through every step of the formation process, including compliance planning for requirements like beneficial ownership reporting. Whether you’re forming a new entity or need ongoing compliance support, our experienced professionals are here to help your business succeed while staying fully compliant with all legal requirements. Contact TrustedLegal.com today to get started with trusted, professional business services.