Beneficial Ownership

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

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.

• 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. Find the complete list at https://banksouth.com/blog/beneficial-ownership-reporting-guide/#Is-Your-Business-Affected   

A beneficial owner is any individual who directly or indirectly owns or controls 25% or more of a company, or who exercises substantial control over the company. This identification helps prevent the misuse of shell companies for illicit activities.

Sometimes. A reporting company is (1) any corporation, limited liability company, or other similar entity that was created in the United States by the filing of a document with a secretary of state or similar office (in which case it is a domestic reporting company), or any legal entity that has been registered to do business in the United States by the filing of a document with a secretary of state or similar office (in which case it is a foreign reporting company), that (2) does not qualify for any of the exemptions provided under the Corporate Transparency Act. An entity’s activities and revenue, along with other factors in some cases, can qualify it for one of those exemptions. For example, there is an exemption for certain inactive entities, and another for any company that reported more than $5 million in gross receipts or sales in the previous year and satisfies other exemption criteria. Neither engaging solely in passive activities like holding rental properties, for example, nor being unprofitable necessarily exempts an entity from the BOI reporting requirements. 

No, unless a sole proprietorship was created (or, if a foreign sole proprietorship, registered to do business) in the United States by filing a document with a secretary of state or similar office. An entity is a reporting company only if it was created (or, if a foreign company, registered to do business) in the United States by filing such a document. Filing a document with a government agency to obtain (1) an IRS employer identification number, (2) a fictitious business name, or (3) a professional or occupational license does not create a new entity, and therefore does not make a sole proprietorship filing such a document a reporting company. 

• Federal agencies engaged in national security, intelligence, or law enforcement activity. 

• State, local, and Tribal law enforcement agencies with court authorization. 

• Officials at the Department of the Treasury. 

• Foreign law enforcement agencies, judges, prosecutors, and other authorities that submit a request through a U.S. Federal agency to obtain beneficial ownership information for authorized activities related to national security, intelligence, and law enforcement. 

• Financial institutions with customer due diligence requirements under applicable law (to facilitate compliance with those requirements) 

• Federal functional regulators or other appropriate regulatory agencies that supervise or assess financial institutions with access to beneficial ownership information (to supervise such financial institutions’ compliance with customer due diligence requirements). 

FinCEN published the rule that will govern access to and protection of beneficial ownership information on December 22, 2023. Beneficial ownership information reported to FinCEN is 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 continue to work closely with those authorized to access beneficial ownership information to ensure that they understand their roles and responsibilities in using the reported information only for authorized purposes and handling in a way that protects its security and confidentiality. 

• FinCEN is engaged in a robust outreach and education campaign to raise awareness of and help reporting companies understand the new reporting requirements. That campaign involves virtual and in-person outreach events and comprehensive guidance in a variety of formats and languages, including multimedia content and the Small Entity Compliance Guide, as well as new channels of communication, including social media platforms. FinCEN is also engaging with governmental offices at the federal and state levels, small business and trade associations, and interest groups. 

FinCEN will continue to provide guidance, information, and updates related to the BOI reporting requirements on its BOI webpage, www.fincen.gov/boi.  

Reporting companies will have to report beneficial ownership information electronically through FinCEN’s
website: www.fincen.gov/boi.

If you need assistance with filing, or would like to view additional information and resources, we have a step-by-step guide available at banksouth.com/blog/beneficial-ownership-reporting-guide/.

No, there is no fee for submitting a beneficial ownership information report to FinCEN. 

• For important information including what is needed to file, or who should file, visit FinCEN’s website at
  www.fincen.gov/boi or visit our online guide for steps on how to file, more information, and additional resources at banksouth.com/blog/beneficial-ownership-reporting-guide/.
• BankSouth is not offering any legal advice. Customers should confer with their legal counsel for additional information on this new requirement.

No. FinCEN expects that many, if not most, reporting companies will be able to submit their beneficial ownership information to FinCEN on their own using the guidance FinCEN has issued. Reporting companies that need help meeting their reporting obligations can consult with professional service providers, such as lawyers, accountants, or enrolled agents. 

Non-compliance may result in civil & criminal penalties.

• If a company was created or registered before 1/1/24, the deadline to file the initial report with FinCen is 1/1/25.
• If a company was created on or after 1/1/24, the company has 90 days after receiving notice of its creation or registration to file its initial report.
• If a company was created on or after 1/1/25, the company has 30 days after receiving notice of its creation or registration to file its initial report.