On March 1, 2022, we announced the Financial Crimes Enforcement Network (FinCEN) issued a notice of proposed rulemaking late in 2021 to implement the beneficial ownership information (BOI) reporting provisions of the Corporate Transparency Act (CTA), which was enacted into law on January 1, 2021, as part of the Anti-Money Laundering Act.  The Proposed BOI reporting laws are designed to help stop bad actors from using legal U.S. entities to hide illicit funds behind shell companies and other opaque corporate structures.

On September 29, 2022, FinCEN issued a final rule to implement the BOI reporting provisions of the CTA. The final rule describes the “Reporting Companies” who must file a BOI report and what information must be included in the BOI report. The BOI report must specifically identify two categories of individuals–the beneficial owners of a reporting company and the company applicants for the reporting company.

The final rule reflects two distinct types of “Reporting Companies” – domestic reporting companies and foreign reporting companies, both of which will be required to file BOI reports. Domestic Reporting Companies are those entities that are created by filing with a secretary of state or a similar office of a jurisdiction within the United States. A foreign Reporting Company is any entity that is formed under the laws of a foreign jurisdiction and is registered to do business within the United States. Twenty-three types of entities are exempt from the definition of Reporting Companies.

Importantly, the final rule reflects changes from the proposed rule discussed in our prior client alert. Key changes include:

  • Companies have more time to comply with BOI reporting requirements. Companies subject to BOI reporting requirements and that were in existence before January 1, 2024, have one year to file a BOI report (i.e., until January 1, 2025), and companies formed or registered on or after January 1, 2024, have 30 days from the date of formation or registration to file a BOI report.
  • The final rule narrows the definition of a Beneficial Owner by exempting five types of individuals from the definition. A “Beneficial Owner” includes an individual who, directly or indirectly, either (1) exercises substantial control over a Reporting Company, or (2) owns or controls at least 25% of the ownership interests of a Reporting Company.
  • The definition of “Company Applicant” has been narrowed to reflect two persons: (1) the individual who directly files the document that creates the entity or files the document for a foreign entity to do business in the United States, and (2) the individual primarily responsible for directing or controlling the filing of the relevant document by another. Additionally, the final rule does not require Reporting Companies existing or registered before January 1, 2024, to identify and report their company applicants.

So, what does this mean for companies? The final rule gives companies more time to gather the necessary information to comply with the BOI reporting requirements. However, it is important to know that companies will need to start thinking about compliance in the near future. We will continue to update companies on how to comply with the final rule throughout the new year with client alerts that will address the following topics: 

  1. Information companies need to comply with BOI reporting requirements
  2. How to file BOI reports
  3. Recommended security protocols for protecting BOI
  4. Recommended compliance strategies for existing companies
  5. Recommended compliances strategies for new companies

In the meantime, if you have questions about how the final rule of Section 6403 of the Corporate Transparency Act may change your internal processes, please contact your Ireland Stapleton attorney or Erica L. Tarpey at etarpey@irelandstapleton.com.

What is written here is for general information only and should not be taken as legal advice. If legal advice is needed, please consult an attorney.