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28 • 2024

Updating Beneficial Ownership Information Previously Filed with FinCEN Will Require Vigilance

The long-awaited and much-debated system requiring tens of millions of small businesses (“reporting companies”) to file with the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of the Treasury certain beneficial ownership information (“BOI”) about the reporting company, its beneficial owner or owners, and, for companies formed or registered after January 1, 2024, the company applicant who files the formation or registration document with the applicable state or tribal regulatory body, is up and running and FinCEN is accepting e-filed BOI through its website.[1] By the end of 2024, all new reporting companies formed and registered this year, as well as more than 32 million existing businesses formed or registered before January 1, 2024, will have to have filed their initial BOI report with FinCEN.[2] Filing an initial report is not the end of the story, however, as all reporting companies will be required to file updated reports when any of their BOI changes. This will require some significant vigilance by business entities to stay abreast of all such changes and timely file the updated reports. Why this is so requires a good understanding of what information a reporting company must report to FinCEN.

What Must Be Reported

A reporting company’s initial report must include information about the reporting company: its full legal name and any trade or “doing business as” name; the street address of the company’s principal place of business; the state, tribal, or foreign jurisdiction of formation; for a foreign reporting company, the state or tribal jurisdiction where the company first registered to business; and the reporting company’s IRS Taxpayer Identification Number, or a similar number for a foreign company.[3]

The initial report also has to include information about each of the reporting company’s beneficial owners, of which there can be more than one. A “beneficial owner” is defined to include “any individual who, directly or indirectly, either exercises substantial control over such reporting company or owns or controls at least 25 percent of the ownership interests of such reporting company.”[4] A person can exercise “substantial control” over a reporting company in various ways, including serving as a “senior officer” of the company;[5] having authority over the appointment or removal of any senior officer or a majority of the board of directors (or similar body); or directing, determining, or having substantial influence over the reporting  company’s “important decisions.”[6] Substantial control may be exercised directly or indirectly through various methods, including board representation or any “contract, arrangement, understanding, relationship, or otherwise.”[7]

What qualifies as an “ownership interest” is likewise defined very broadly to include, among other things, any equity, stock, or similar instrument, any capital or profit interest, any instrument convertible into stock or a capital or profit interest, or “[a]ny other instrument, contract, arrangement, understanding, relationship, or mechanism used to establish ownership.”[8] As with substantial control, an ownership interest may be owned directly or indirectly “through any contract, arrangement, understanding, relationship, or otherwise,” including joint ownership with one or more other persons or a trust or similar arrangement.[9] If an ownership interest is owned by a minor child, as may often be the case when ownership is through a trust, then the reporting company may instead report the required information relating to the minor child’s parent or legal guardian.[10]

For each individual who qualifies as a “beneficial owner,” the reporting company must include in its initial report to FinCEN the individual’s full legal name, date of birth, and residential street address.[11] In addition, the reporting company must report both (1) a unique identifying number and the issuing jurisdiction from a non-expired U.S. passport (or a non-expired foreign passport if the individual does not possess a qualifying U.S. document) or non-expired state driver’s license or other identifying document issued by a state, local government, or Indian tribe, and (2) an image of the document.[12] In lieu of all of this information, the reporting company may include in its report a “FinCEN identifier” for an individual who has obtained one from FinCEN; however, the individual must submit all of the same required information to FinCEN when applying for a FinCEN identifier.[13]

Updated Reports

So, a fair amount of information has to be collected by the reporting company and included in its initial report to FinCEN. But the process does not end there.

A reporting company is also required to file, within 30 days after the date when a change occurs, an updated report[14] to reflect “any change with respect to required information previously submitted to FinCEN concerning a reporting company or its beneficial owners, including any change with respect to who is a beneficial owner or information reported for any particular beneficial owner.”[15] FinCEN has provided some examples of likely triggers for the filing of an updated report:

  • “Any change to the information reported for the reporting company, such as registering a new business name.
  • A change in beneficial owners, such as a new CEO, or a sale that changes who meets the ownership interest threshold of 25 percent ….
  • Any change to a beneficial owner’s name, address, or unique identifying number previously provided to FinCEN. If a beneficial owner obtained a new driver’s license or other identifying document that includes a changed name, address, or identifying number, the reporting company also would have to file an updated beneficial ownership information report with FinCEN, including an image of the new identifying document.”[16]

The last example shows just how careful a reporting company and its beneficial owner or owners will have to be to comply with the requirement to submit updated reports when any BOI changes. If a beneficial owner’s unique identifying number came from a U.S. passport, then that number will change when the passport is renewed,[17] which will trigger the requirement to submit an updated report including the new passport number and an image of the new passport. That is a detail that could easily be overlooked.

Another example specifically covered in FinCEN’s regulations implementing the reporting requirement is that if a reporting company has reported information with respect to a parent or legal guardian in lieu of a minor child, then “a change with respect to required information will be deemed to occur when the minor child attains the age of majority.”[18] So, for example, if a minor child qualifies as a “beneficial owner” of a reporting company through a trust arrangement, then, within 30 days after the child’s eighteenth birthday, the reporting company must submit an updated report reflecting that fact. Add that to the list of items to accomplish in connection with the child’s birthday party. It’s no wonder that FinCEN has cautioned that existing reporting companies, as well as persons considering creating or registering new entities that will qualify as reporting companies “should engage with their beneficial owners to advise them of this [reporting] requirement, obtain required information, and revise or consider putting in place mechanisms to ensure that beneficial owners will keep reporting companies apprised of changes in reported information, if necessary.”[19]

One final note: obtaining a FinCEN identifier is not a workaround for the obligation to file updated information when any change in the BOI occurs. FinCEN’s implementing regulations specifically provide that “[i]f there is any change with respect to required information previously submitted to FinCEN in such application” for a FinCEN identifier, which includes all of the same information noted above (full legal name, date of birth, residential address, and unique identifying number from, and image of, a non-expired passport or driver’s license), then the individual “shall file an updated application reflecting such change within 30 calendar days after the date on which such change occurs.”[20] Thus, whether the change is reported in an updated report or an updated application for a FinCEN identifier, the change will have to be reported to FinCEN within 30 days of when the change occurs.

[1] See FinCEN, Welcome to the BOI E-Filing System.

[2] See 31 C.F.R. § 1010.380(a)(1)(i)-(iii), (b).

[3] See id. § 1010.380(b)(1)(i).

[4] See id. § 1010.380(d).

[5] A “senior officer” includes “any individual holding the position or exercising the authority of a president, chief financial officer, general counsel, chief executive officer, chief operating officer, or any other officer, regardless of official title, who performs a similar function.” Id. § 1010.380(f)(8).

[6] Id. § 1010.380(d)(1)(i). “Important decisions” include, for example, decisions regarding the sale, lease, mortgage, or other transfer of any of the company’s principal assets; any major expenditures or investments; compensation schemes and incentive programs for senior officers; and the entry into or termination of any significant contracts. Id. § 1010.380(d)(1)(i)(C).

[7] Id. § 1010.380(d)(1)(ii).

[8] Id. § 1010.380(d)(2)(i).

[9] Id. § 1010.380(d)(2)(ii). For more information about joint ownership, see eMinutes, Questions Continue About FinCEN Beneficial Ownership Information Reporting (Dec. 8, 2023). For more information about beneficial ownership through a trust arrangement, see eMinutes, FinCEN Reporting of Information Concerning Beneficial Ownership Held By Trusts (Jan. 17, 2024).

[10] 31 C.F.R. § 1010.380(b)(2)(ii).

[11] Id. § 1010.380(b)(1)(ii)(A)-(C).

[12] Id. § 1010.380(b)(1)(ii)(D)-(E).

[13] Id. § 1010.380(b)(4).

[14] An “updated report” is not an update just to the information that changed since the initial report or a prior updated report; it is literally an entirely new report containing all of the information that has remained the same as well as any information that has changed. See FinCEN, Beneficial Ownership Reporting: Frequently Asked Questions, FAQ H.4 (“Updated BOI reports will require all fields to be submitted, including the updated pieces of information. For example, if a reporting company changes its legal name, the reporting company will need to file an updated BOI report to include the new legal name and the previously reported, unchanged information about the company, its beneficial owners, and, if required, its company applicants.”).

[15] 31 C.F.R. § 1010.380(a)(2) (emphasis added).

[16] See FinCEN, Beneficial Ownership Reporting: Frequently Asked Questions, FAQ H.2; see also FinCEN, Small Entity Compliance Guide v. 1.1, at 45-46 (Dec. 2023) (discussing some of the same examples); 31 C.F.R. § 1010.380(a)(2)(v) (“With respect to an image of an identifying document required to be reported …, a change with respect to required information will be deemed to occur when the name, date of birth, address, or unique identifying number on such document changes.”).

[17] See Josh Garber, Does Your Passport Number Change When Renewed? (Oct. 31, 2023).

[18] 31 C.F.R. § 1010.380(a)(2)(iv).

[19] See FinCEN, Beneficial Ownership Reporting: Frequently Asked Questions, FAQ K.5.

[20] 31 C.F.R. § 1010.380(b)(4)(iii)(A)(1).