Beneficial Ownership Information
starting january 1, 2024, almost all corporate entities formed in the united states will be required to provide beneficial ownership information to the U.S. TREASURY
Beneficial Ownership Information Required by the Corporate Transparency Act of 2019
Welcome to our webpage dedicated to explaining the Beneficial Ownership Information requirements under the Corporate Transparency Act of 2019. This landmark legislation has been enacted to enhance corporate transparency and combat financial crimes. Here, we provide a comprehensive overview of what beneficial ownership information is required to be provided under this act.
What is the Corporate Transparency Act (CTA) of 2019?
The Corporate Transparency Act (CTA) of 2019 is a United States federal law aimed at combating money laundering, terrorist financing, and other illicit financial activities. The act places a strong emphasis on identifying the true owners or "beneficial owners" of corporations, limited liability companies (LLCs), and similar legal entities, thereby increasing transparency within the business sector.
Beneficial Ownership Information: What Does It Entail?
Under the Corporate Transparency Act, covered entities are required to disclose certain beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. Beneficial ownership information refers to details about individuals who ultimately own or control the entity.
The following key points outline the essential aspects of beneficial ownership information required:
Identifying Beneficial Owners: Covered entities must identify and report individuals who qualify as "beneficial owners." A beneficial owner is someone who directly or indirectly owns 25% or more of the entity's equity interests or has significant control over the entity.
Required Information: The beneficial ownership information that needs to be provided includes the following for each beneficial owner:
- Full legal name
- Date of birth
- Current residential or business address
- A unique identification number (e.g., Social Security Number or passport number)
Reporting Entity Information: In addition to beneficial owner details, covered entities need to provide information about the reporting entity itself, including its legal name, physical address, and any relevant identification numbers.
Updates and Changes: Covered entities are required to update the provided information within one year of any change in beneficial ownership.
Exemptions and Confidentiality:
Certain entities are exempt from the reporting requirements, including publicly traded companies, certain financial institutions, and governmental entities. Beneficial ownership information submitted to FinCEN will be subject to strict privacy and confidentiality safeguards. Here is a list of 23 types of entities exempted:
- Certain types of securities reporting issuers.
- A U.S. governmental authority.
- Certain types of banks.
- Federal or state credit unions as defined in section 101 of the Federal Credit Union Act.
- Any bank holding company as defined in section 2 of the Bank Holding Company Act of 1956, or any savings and loan holding company as defined in section 10(a) of the Home Owners’ Loan Act.
- Certain types of money transmitting or money services businesses.
- Any broker or dealer, as defined in section 3 of the Securities Exchange Act of 1934, that is registered under section 15 of that Act (15 U.S.C. 78o).
- Securities exchanges or clearing agencies as defined in section 3 of the Securities Exchange Act of 1934, and that is registered under sections 6 or 17A of that Act.
- Certain other types of entities registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934.
- Certain types of investment companies as defined in section 3 of the Investment Company Act of 1940, or investment advisers as defined in section 202 of the Investment Advisers Act of 1940.
- Certain types of venture capital fund advisers.
(xii) Insurance companies defined in section 2 of the Investment Company Act of 1940.
- State-licensed insurance producers with an operating presence at a physical office within the United States, and authorized by a State, and subject to supervision by a State’s insurance commissioner or a similar official or agency.
- Commodity Exchange Act registered entities.
- Any public accounting firm registered in accordance with section 102 of the Sarbanes-Oxley Act of 2002.
- Certain types of regulated public utilities.
- Any financial market utility designated by the Financial Stability Oversight Council under section 804 of the Payment, Clearing, and Settlement Supervision Act of 2010.
- Certain pooled investment vehicles.
- Certain types of tax-exempt entities.
- Entities assisting a tax-exempt entity described in (xix) above.
- Large operating companies with more than 20 full-time employees, more than $5,000,000 in gross receipts or sales, and an operating presence at a physical office within the United States.
- The subsidiaries of certain exempt entities.
- Certain types of inactive entities that were in existence on or before January 1, 2020, the date the Corporate Transparency Act was enacted.
Purpose and Impact:
The Corporate Transparency Act's primary goal is to enhance transparency in corporate ownership, making it harder for criminals to hide their illicit activities behind anonymous shell companies. By requiring entities to provide beneficial ownership information, law enforcement agencies can more effectively track financial flows and investigate potential wrongdoing.
Frequently Asked Questions (FAQ):
What is beneficial ownership information (BOI)? Beneficial ownership information refers to identifying information about the individuals who "directly" or "indirectly" own or control a company.
Should my company report beneficial ownership information now? No. No one needs to report beneficial ownership information to FinCEN until January 1, 2024.
When do I need to report my company's beneficial ownership information to FinCEN? A reporting company created or registered to do business BEFORE January 1, 2024, will have until January 1, 2025 to file its initial beneficial ownership information report. A reporting company created or registered ON OR AFTER January 1, 2024, will have 90 days to file its initial beneficial ownership information report. This 90-day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration , whichever is earlier.
Will there be a fee for submitting a beneficial ownership information report to FinCEN? No. There is no fee for submitting your beneficial ownership information report to FinCEN.
Who is a beneficial owner of a reporting company? In general, a beneficial owner is any individual (1) who directly or directly exercise "substantial control" over the reporting company, OR (2) who directly or indirectly owns or controls 25 percent or more of the "ownership interests" of the reporting company.
Will a reporting company need to report any other information in addition to information about its beneficial owners? Yes. The information that needs to be reported, however, depends on when the company was created or registered. If a reporting comopany is created or registered ON OR AFTER January 1, 2024, the reporting company will need to report information about itself, its beneficial owners AND its company applicants. If a reporting was created or registered BEFORE January 1, 2024, the reporting company only needs to provide information about itself and its beneficial owners. The reporting company does NOT need to provide information about its company applicants.
Who is a "company applicant" of a reporting company? There can be up to two individuals who qualify as company applicants: (1) the individual who directly files the document that creates, or first registers the reporting company; and (2) the individual that is primarily responsible for directing or controlling the filing of the relevant document.
What information will a reporting company have to report about itself? (1) Its legal name; (2) Any trade names, "doing business as" (d/b/a), or "trading as" (t/a) names; (3) The current street address of its principal place of business if that address is in the United States (for example, a domestic reporting company's headquarters), or, for reporting companies whose principal place of business is outside the United States, the current address from which the company conducts business in the United States (for example, a foreign reporting company's U.S. headquarters); (4) its jurisdiction of formation or registration; and (5) Its Taxpayer Identification Number also known as Employer Identifiction Number.
What will a reporting company have to report about its beneficial owners and company applicants? For each individual who is a beneficial owner or a company applicant, a reporting company will have to report: (1) The individual's name, date of birth, and address; (2) A unique identifying number from an acceptable identification document; and (3) The name of the state or jurisdiction that issued the identification document.
- For a beneficial owner, the reporting company must report the residential street address.
- For a company applicant, the reporting company must report the individual’s residential street address. However, if an individual engages in the business of corporate formation (e.g., as an attorney or corporate formation agent) and files the formation or registration document in the course of that business, then the reporting
company must report the current street address of the company applicant’s business.
- For example, if the company applicant is a paralegal who filed the document while working at a law firm, the reporting company must report the business address of the law firm where the paralegal worked when filing the document.
The list below sets out the forms of acceptable identification
- A non-expired driver’s license issued by a U.S. state. A “U.S. state” means any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, Guam, the U.S. Virgin Islands, and any other commonwealth, territory, or possession of the United States.
- A non-expired identification document issued by a U.S. state or local government, or Indian Tribe that is issued for the purpose of identifying the individual. For example, a non-driver identification card issued by a state Department of Motor Vehicles would qualify because it is issued for identification purposes.
- A non-expired passport issued by the U.S. government; or
- If the individual does not have any of the three forms of identification document described above, the reporting company may provide the identifying number from a non-expired passport issued by a foreign government.
In addition, the reporting company must submit an image of the identification document associated with the unique identifying number reported to FinCEN.
How will I report my company's beneficial ownership information? If you are required to report company's beneficial ownership information FinCEN, you will do so electronically through a secure filing system available via FinCEN's website.
Who will be able to access reported beneficial ownership information and for what purposes? The Corporate Transparency Act authorizes FinCEN to disclose beneficial ownership information in certain circumstances to six types of requesters:
- U.S. Federal agencies engaged in national security, intelligence, and law enforcement activities;
- State, local, and Tribal law enforcement agencies with court authorization;
- The U.S. Department of the Treasury;
- Financial institutions using beneficial ownership information to conduct legally required customer due diligence, provided the financial institutions have their customer consent to retrieve the information;
- Federal and state regulators assessing financial institutions for compliance with legally required customer due diligence obligations; and
- Foreign law enforcement agencies and certain other foreign authorities who submit qualifying requests for the information through a U.S. Federal agency.
The Corporate Transparency Act imposes stringent access requirements and safeguards on each group of requesters.
How will FinCEN protect beneficial ownership information reported to it? Protecting the security and confidentiality of beneficial ownership information is a top priority for FinCEN. Federal law requires FinCEN to implement protocols to safeguard beneficial ownership information, to build a secure IT system to store the
information, and to establish processes and procedures to ensure that only authorized users can access beneficial ownership information for authorized purposes. FinCEN is developing the policies and procedures that will govern access to and handling of beneficial ownership information. FinCEN is also building a secure and confidential IT system to store the information. Consistent with Federal law, the system will be cloud-based, and will meet the highest Federal Information Security Modernization Act (FISMA) level to keep beneficial ownership information secure. FinCEN will work closely with those authorized to access beneficial ownership information to ensure that they understand their roles and responsibilities to ensure that the reported information is used only for authorized purposes and handled in a way that protects its security and confidentiality.
The Corporate Transparency Act of 2019 represents a significant step toward curbing financial crimes and promoting transparency in the business world. By mandating the disclosure of beneficial ownership information, the act aims to create a more accountable and secure business environment. If you are a covered entity, it's essential to understand your obligations under this act and ensure compliance to avoid potential legal consequences.
For more detailed information and legal advice tailored to your specific situation, consult legal professionals well-versed in the Corporate Transparency Act and related regulations.
We hope you found this information beneficial. If you have any other questions, please do not hesitate to call us at 302-996-5819 or 1-800-423-2993.
Thank you for your interest in the Beneficial Ownership Interest Reporting requirements.
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