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New Reporting Requirements for LLCs Under the New FinCEN Law

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has introduced a groundbreaking rule that significantly impacts businesses in the country, including limited liability companies (LLCs). The Corporate Transparency Act (CTA) aims to combat illicit financial activities by imposing new reporting requirements on those entities.

Let’s explore the reporting requirements under the new Financial Crimes Enforcement Network law and their implications for LLC reporting.

Understanding BOI and the CTA

The Corporate Transparency Act, commonly known as the “Access Rule,” is a bipartisan effort to curb money laundering, fraud, and other financial crimes facilitated by anonymous corporate entities. On September 30, 2022, the CTA finalized the Beneficial Ownership Information (BOI) Reporting Rule, requiring certain U.S. businesses, including LLCs, to report their beneficial ownership information to FinCEN.

Beneficial owners are individuals who ultimately own or control a business and its assets directly or indirectly. They are the individuals who have a 25% or more ownership interest in a company, exercise substantial control over it, and receive significant economic benefits from it.

On December 21, 2023, the Financial Crimes Enforcement Network announced the Beneficial Ownership Information Access and Safeguards Final Rule, addressing the access to and security of BOI. This rule outlines circumstances where FinCEN can share beneficial ownership information with law enforcement, financial institutions, and other government agencies. It also sets out the standards for safeguarding this sensitive information, including re-disclosure restrictions, data security protocols, and penalties for violations.

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Stay compliant with the Corporate Transparency Act by securing your Beneficial Ownership Information Report.

Key Reporting Requirements

The BOI Reporting Rule took effect on January 1, 2024, requiring certain businesses to report their beneficial ownership information. Here are essential reporting requirements to keep in mind.

Reportable Information

FinCEN generally requires companies to provide four categories of information about their beneficial owners, including:

  1. Name
  2. Date of birth
  3. Address
  4. The identifying number and issuer from a non-expired driver’s license, passport, or identification document issued by a state or federal government

Additionally, the company must submit basic identifying information about itself, such as its legal name, trade name, current primary address, the jurisdiction of formation or registration, and the taxpayer identification number (TIN).

Deadline for Compliance

The BOI Reporting Rule took effect on January 1, 2024. Here are the key deadlines to keep in mind:

  • Businesses formed before January 1, 2024, must submit their initial beneficial ownership information report by January 1, 2025.
  • When formed after January 1, 2024, they will have 90 days from creation or registration to submit their BOI report.
  • Those formed after January 1, 2025, will have 30 days from the date of formation or registration to submit their beneficial ownership information report.

Reporting Updates

According to the Financial Crimes Enforcement Network, BOI reporting is not an annual obligation. Companies must report their BOI information only once. However, businesses are required to submit updates if there is a change or correction in their beneficial ownership information.

Implications for LLCs

The CTA and BOI Reporting Rule have significant implications for those entities.

Enhanced Corporate Transparency

The new beneficial ownership information rule significantly contributes to the overall goal of improving corporate transparency. By revealing the individuals who control and benefit from LLCs, the government aims to reduce the misuse of corporate structures for illicit purposes.

Protection Against Financial Crimes

The information BOI collects is invaluable in the fight against money laundering, fraud, and other financial crimes. Law enforcement, intelligence agencies, and regulatory bodies will have a clearer understanding of the ownership structures behind LLCs, enabling them to take swift action against illicit activities.

Preparation and Compliance

Limited liability companies must proactively prepare for compliance with the new reporting requirements. LLC reporting involves gathering the necessary information about beneficial owners and ensuring it is accurate and up-to-date. Companies should also familiarize themselves with the reporting deadlines to avoid penalties for non-compliance.

Potential Violations

Companies that knowingly fail to submit a BOI report, provide false information, or do not correct or update their information may face fines and penalties. Civil monetary penalties may be up to $500 each day the violation continues, while criminal penalties include a fine of up to $10,000 and imprisonment for up to two years.

LLCs must take these reporting requirements seriously to enjoy continuous operations and avoid facing significant fines and penalties.

Final Thoughts

The CTA and the BOI Reporting Rule are significant in the ongoing efforts to combat financial crimes and enhance corporate transparency. Limited liability companies must understand their obligations under these new rules and take the necessary steps to comply. By doing so, they fulfill their legal responsibilities and contribute to a more secure and transparent business environment.

Drafted Legal offers online legal documents to help entrepreneurs meet their obligations, start business LLC and more. Have a question? Contact us today.


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