Navigating the New Beneficial Ownership Information Reporting Rule

Mike Lodzinski
Published on

Starting January 1, 2024, there's a new requirement for all companies incorporated or doing business in the United States. This mandate stems from the Corporate Transparency Act, which became law in 2021. It's overseen by the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) pursuant to the regulations released by FinCEN.

The Beneficial Ownership Information Reporting Rule is aimed at combating various illegal activities like money laundering, corruption, and tax fraud. It necessitates that both domestic and foreign entities, termed as "reporting companies," disclose specific information about themselves and their beneficial owners.

Who does this apply to?

Reporting companies refer to corporations, LLCs, or other entities created through state or tribal filings, or foreign entities registered to conduct business within the U.S. There are exemptions, though. Entities such as securities reporting issuers, banks, governmental bodies, and more fall outside this reporting requirement.

What info needs to be reported?

Initial reports to FinCEN by reporting companies must include details like full legal names, addresses, jurisdiction of formation, and tax identification numbers. For individuals considered beneficial owners or company applicants, their personal information, including names, addresses, dates of birth, and unique identification numbers from specific documents, should be provided.

Who falls under beneficial owner or company applicant?

A beneficial owner is someone who directly or indirectly holds substantial control or at least 25% ownership of the reporting company. A company applicant is the individual responsible for filing to create or register the company.

When to file?

The deadlines vary based on when the reporting company was created or registered, ranging from 2024 to 2025, with specific time frames for filing reports.

How to file with FinCEN?

Starting January 1, 2024, reporting companies can file their reports directly with FinCEN.

Penalties for non-compliance?

Failure to comply with the reporting requirements can lead to civil and criminal penalties, including fines and imprisonment for willful violations.

Access to reported information?

FinCEN has outlined access rules that allow authorized recipients—like federal agencies, law enforcement bodies, financial institutions adhering to specific standards, and Treasury Department officials—to access this information under strict security and confidentiality measures.

About the Author
Mike Lodzinski

Mike started his legal career in 2005 as an Associate in the Corporate & Securities Practice Group of Thompson & Knight LLP. After leaving Thompson & Knight, Mike worked in various in-house roles of increasing responsibility with Toshiba, Hewlett-Packard Enterprise and Hempel expanding his experience in a variety of industries, including renewable energy, oil and gas, manufacturing, and power generation, among others. Mike is currently General Counsel of Advario North America, a leading provider of storage and logistics solutions in the energy and chemical industry.

In 2009, Mike founded Nighthawk Machinery, a manufacturer and distributor of solid tires and rubber tracks for the construction industry, which was acquired by a competitor in 2018. Since 2018, Mike has invested in several start-ups and early-stage companies and has been active as an advisor in various legal and non-legal capacities. In addition to his role with Advario, Mike is a Partner at Pursuit Legal, a boutique business law firm that provides intelligent legal solutions to SMEs and startups, where he uses his unique skill set to advise a select handful of start-ups and early-stage companies from the idea stage through scale-up.

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