All corporations and LLCs must report beneficial ownership

In 2021, Congress passed the Corporate Transparency Act (“CTA”) based on its “sense” that a “clear, federal, standard for incorporation practices” is required to prevent “malign actors” from concealing their ownership of business entities to engage in money laundering, because “most or all States do not require information about beneficial owners of the” business entities formed under state law.  As a result, the CTA requires private corporations, limited liability companies, and other business entities formed under state or tribal law to report to the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of the Treasury certain information about each beneficial owner of the entity.  To learn more about the law, please click here.

Our fee is $115 to file the initial FinCen BOI filing; and our FinCen update service is $45 per year.  Our FinCen services are available only for entities enrolled in our Entity Management service.

FinCEN is proposing a massive data-gathering regime encompassing nearly every private business entity formed or registered to do business in the United States. Reports concerning beneficial ownership information of such entities will have to be filed by every “reporting company.”  The term “reporting company” is defined to include both a “domestic reporting company”—any corporation, limited liability company, or other entity that is created by the “filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe”—and a “foreign reporting company”—any corporation, LLC, or other entity formed under the law of a foreign country and registered to do business in any State or tribal jurisdiction by the filing of such a document.

For each beneficial owner, the reporting company will have to provide to FinCEN the individual’s full legal name, date of birth, complete current address, and a unique identifying number from a current U.S. or foreign passport or State driver’s license.  The reporting company will also have to provide an image of the identification document that “includes both the unique identifying number and photograph in sufficient quality to be legible or recognizable.” All of this information will have to be kept up-to-date with FinCEN, so that any time there is a change in who is a beneficial owner or in any of the information as to an existing beneficial owner or company applicant (such as a change of address or even a new driver’s license or passport, which must be “non-expired”), the reporting company will have to file an updated report within 30 days of the date when the change occurs.

Compliance with the new reporting requirements will be essential. Under the CTA and the proposed regulations, it will be unlawful for any person to willfully provide, or attempt to provide, false or fraudulent beneficial ownership information, including a false or fraudulent identifying photograph or document, or to willfully fail to report complete or updated beneficial ownership information, to FinCEN. The potential penalties are substantial: a civil penalty of up to $500 for each day that the violation continues or has not been remedied, and a fine of up to $10,000 or imprisonment for up to two years, or both.

The following deadlines apply to all entities:

• All entities formed prior to January 1, 2024, must file an initial report by December 31, 2024
• All entities formed after January 1, 2024, must file an initial report within 90 days of the formation date
• All entities must file an updated report within 30 days of the change to the information reflected on the initial report.

FinCen requires an updated report to be filed whenever any change occurs regarding the data on the previously submitted report (https://eminutes.com/updating-beneficial-ownership-information-previously-filed-with-fincen-will-require-vigilance).   The law not only requires updates when there are changes to corporate information (e.g.,  principal place of business, mailing address, officers, directors), it also requires updates when there are changes to personal information of the benefical owners (e.g, residential address, government ID, etc.).  To add even more nuance, some insignificant changes do not need to be reported, but making the determination involves diligently analyzing the changes (which involves substantial attorney time).

Our FinCen update service is $45 per year.  The annual fee will be charged at the time our entity management fee is renewed.

For January 2025 entity management renewals, our FinCen Update service will include the following:

• When a government ID expires, we will reach out to ask for an updated ID.  A new ID can be submitted securely in our portal. In all cases, we will file an updated FinCen report (without regard to whether change meets the threshold for a new filing)
• We will use the trigger of the ID expiration date to ask if the beneficial owner’s residential address has changed, and update it with FinCen accordingly
• At any other time during the year, if a Beneficial Owner’s residential address changes, please reach out to us.  There will be no additional charge for FinCen updates
• During the year, when there is a change to any corporate information (principal place of business address, mailing address, officer/director/manager change), there will be no additional charge for the FinCen update
• When a minor who owns shares or membership interest turns 18, there will be no additional charge for FinCen updates.  Ultimately, it is our intention to monitor the birthdates of minors in our system, but at this time we ask that our clients please reach out to us to tell us when a minor turns 18

While filing FinCen Updates is required by law, enrollment in our FinCen update service is not mandatory.  Any client can select to opt-out of the FinCen Update service.  If you wish to opt out, please email us.  The FinCen Update service is also complicated.  We are learning how to best deliver this service efficiently, so your feedback is very sincerely appreciated.

Our system monitors the expiration dates for government IDs.  We use the trigger of the ID expiration date to update the government ID and residential address.  When a government ID expires, we will proactively send a link to the client.  A new ID (and updated residential address) can be submitted securely in our portal. In all cases, we will file an updated FinCen report (without regard to whether change meets the threshold for a new filing)

To be eligible to be included in our FinCen Update service, the following requirements apply:

• The entity must be enrolled in our entity management service
• We must have an initial FinCen filing transcript on file (filed by us or by others)
• If the entity has other entities that are shareholders, members, or managers, each entity that is part of the structure must be enrolled in our entity management service

We work really hard on encryption and security.  All data sent to and from the online portals is encrypted with best practice standards.  All access for EMINUTES employees utilizes the same encryption with additional layers of protection, requiring multi factor authentication, time limited sessions and IP address tracking — the same systems that banks use.  All data is stored on private networks with no public access.

• The expired ID is an important trigger that we can monitor (unlike change in other information like residential address), so we use the expired ID trigger to reach out to all clients to gather updates on addresses, etc.  This is especially important because a substantial number of our clients move to different states each year, so we need to capture completely new state IDs.
• All passports have different ID numbers, so they always need to be updated.
• Some states have changed their ID numbers, renumbered IDs, etc., so there is no way to set up hard fast “rules” to know which state IDs will dependably remain the same.
• Reviewing old ID and new ID to determine if there are “material” changes is difficult to do without spending more professional time than can be justified.

Even if a company has a FinCen identifier, it still must file (within 30 days) an updated report to reflect any change in corporate information (e.g.,  name change; change in officers, directors;  sale of shares that results in new owners who meet the 25% ownership threshold;  address change; when a beneficial onwner has a new ID with a change to the image or residential address or identifying number or jurisdiction, etc).  If the company is a member, manager or shareholder of another entity, the FinCen identifier may enable each of the other entities in the organizational structure to avoid filing an updated report, but only to the extent that there were no changes to the other entities in the organizational structure.  For example, if ABC, LLC has a FInCen identifier and it’s manager, Abraham Lincoln, has a residential address change; then if ABC, LLC is a member of XYZ, LLC and Abraham Lincoln is a manager of XYZ, LLC, each of the LLCs would file an updated report.

A small slice of company updates can be simplified if one of the individual beneficial owners has an individual FinCen identification number … but only with respect to the beneficial owner who has the identifier number.  The company would still need to report (within 30 days) an updated report to reflect any change in corporate information (e.g.,  name change; change in officers, directors;  sale of shares that results in new owners who meet the 25% ownership threshold;  address change; when a beneficial onwner (who does not have an identifier) has a new ID with a change to the image or residential address or identifying number or jurisdiction, etc).  The individual with the identifier has an obligation to administer the number, reporting changes to identification or address to FinCen.