Guidance for FinCEN Benefit Ownership Information Reporting

The Financial Crimes Enforcement Network (FinCEN) has implemented the Beneficial Ownership Information (BOI) reporting rule in compliance with the Corporate Transparency Act (CTA) of 2021. This rule aims to enhance the ability of FinCEN and other agencies to protect U.S. national security and the U.S. financial system from illicit use. As a result, many privately held U.S. entities and foreign entities registered to do business in the U.S. must file a report with FinCEN.

Under the BOI rule, the entities required to report include:

• The entity itself — This encompasses the primary information about the business entity.
• Beneficial owners — Individuals who, directly or indirectly, exercise substantial control over the entity or own at least 25 percent of the ownership interests in the entity on a fully consolidated basis. These individuals must provide personal information, making it harder for illicit actors to use corporate structures like shell and front companies to hide their identities.
• Company applicants — Persons involved with filing documents that create the entity or, in the case of a foreign entity, registering the entity to do business within the U.S. with relevant State or Tribal authorities.

The purpose of this rule is to prevent illicit actors from using corporate structures to obfuscate their identities and launder ill-gotten gains through the United States. By requiring transparency in ownership and control, the rule aims to strengthen the integrity of the U.S. financial system and deter money laundering and asset hiding.

FinCEN began accepting reports on January 1, 2024. It is anticipated that it will cost reporting companies with simple management and ownership structures approximately $85 to prepare and submit an initial BOI report. This cost is based on FinCEN’s expectation that most reporting companies will have straightforward structures.

Navigating the complexities of BOI reporting to FinCEN can be daunting. Business compliance legal counsel can provide invaluable assistance to ensure your company complies with the new requirements. Comprehensive services offered by your business attorney should include:

• Assessment and identification — There must be an initial assessment to determine which entities and individuals need to be reported. This involves understanding the ownership and control structures of your business to identify beneficial owners and company applicants.
• Report preparation and filing — Accurate and timely submission of BOI reports is essential. Your attorney can help prepare and file these reports using FinCEN’s E-Filing System, ensuring that all necessary information is correctly included and submitted on time.
• Exemption analysis — Not all entities are required to report under the BOI rule. Identifying potential exemptions can streamline the compliance process, saving time and resources. Your attorney can analyze your business structure to determine if any exemptions apply and advise on the best course of action.

At Law Offices of Donald W. Hudspeth P.C. in Phoenix, Arizona, we routinely assist clients in limiting or completely avoiding consequences for regulatory violations. To schedule a consultation, call our Phoenix firm today at 866-696-2033 or contact us online.