FinCEN Final Rule on Beneficial Ownership Information Reporting

Peter Tirella | 10.25.22

On September 29, 2022, the Financial Crimes Enforcement Network (FinCEN) issued a final rule (the BOI Rule) implementing the Corporate Transparency Act’s (CTA) beneficial ownership information (BOI) provisions. The BOI Rule is designed to make it more difficult for criminals and other bad actors to use shell and front companies to carry on illegal activity.

This article serves as a broad overview of the BOI Rule and its applicability. This Article is not legal advice and does not replace reading the BOI Rule in its entirety.

Applicability

The BOI Rule applies to both domestic and foreign entities (each referred to as ​“Reporting Companies”) that are created or registered by filing documents with a state’s secretary of state or other similar office (in Wisconsin, that generally would be the Department of Financial Institutions). These entities include, but are not limited to, limited liability companies, corporations, limited partnerships, and business trusts. Despite this broad classification, an entity may fall under one of the twenty-three listed exemptions including, but not limited to, banks, tax-exempt entities, public utilities, and insurance companies so as to be excepted from the BOI Rule.

The BOI Rule will take effect on January 1, 2024. Reporting Companies formed before this date have until January 1, 2025 to file their initial reports (discussed below), while Reporting Companies formed after this date have 30 days following their creation or registration to file the reports.

Definitions

The BOI Rule’s operative provisions require each Reporting Company to file a BOI report including identifying information of the entity’s ​“Beneficial Owners” and ​“Company Applicants.”

A Beneficial Owner is any individual who, directly or indirectly, exercises substantial control over the entity or owns or controls at least 25% of the entity’s ownership interests. The BOI Rule provides considerable guidance as to what ​“substantial control” means, so it is necessary to fully understand its provisions and identify which individuals and entities may be covered.

A Company Applicant means the individual who files the document creating or registering the Reporting Company and the individual who is primarily responsible for directing or controlling the document’s filing by another. For example, this may include both a responsible partner and such partner’s legal assistant or paralegal.

Requirements

When filing its BOI report, each Reporting Company must identify itself and report the following information about all of its Beneficial Owners:

1. Full Legal Name
2. Birthdate
3. Current residential address
4. Unique identifying number and issuing jurisdiction from an acceptable identification document (e.g., passport), and an image of the same.

Any Reporting Company created after January 1, 2024 must provide the above information about its Company Applicants as well. Comparatively, a Reporting Company formed before January 1, 2024 must only report its formation before then, without corresponding Company Applicant information.

If any previously reported information changes, the Reporting Company must file an updated BOI report within 30 calendar days of such change. For example, if a Beneficial Owner changes residential addresses, the Reporting Company must report this fact within 30 days of the Beneficial Owner’s move. It will be unlawful to willfully fail to file an updated report, so it is necessary to closely monitor all Beneficial Owners and Company Applicants to ensure accurate reporting.

If you have any questions on the BOI Rule or other items discussed in this Article, please contact your usual Boardman Clark attorney or any member of our business practice group.

• Corporate Transparency Act (CTA)