The term “beneficial ownership” refers to identifying information about individuals who directly or indirectly own or control a company. This information is vital for transparency and to combat financial crimes such as money laundering and fraud.

Every LLC has at least one beneficial owner, defined as an individual exercising substantial control over the company or owning/control at least 25% of its ownership interests. Even if no individual owns 25%, those with significant decision-making authority are considered beneficial owners.

A beneficial owner must be an individual and excludes minors, nominees, intermediaries, employees, those with future interests through inheritance, and creditors.

LLCs created on or after January 1, 2024, are required to report information about company applicants, individuals responsible for creating or directing the filing of LLC documents.

Rules for LLC’s:
The Corporate Transparency Act (CTA) mandates the reporting of beneficial ownership information for entities meeting the definition of a “reporting company.” An LLC is considered a reporting company, necessitating the filing of a Beneficial Ownership Information (BOI) report unless exempt.

Exemptions for LLCs:
While there are 23 exemptions available, most LLCs may not qualify for them, as they primarily include entities already subject to government regulation. An exemption based on the size of the LLC exists, with companies employing over 20 full-time employees, having a physical office in the US, and meeting certain financial criteria being exempt.

Information Required in the BOI Report:
For an LLC required to file a BOI report, the information must include the company’s legal name, trade names, principal address, jurisdiction of formation, and taxpayer identification number. Additionally, details of beneficial owners, including legal names, birthdates, addresses, and identification numbers, must be provided.

Filing Timeline for BOI Report:
LLCs created before 2024 can file their initial BOI report starting January 1, 2024, with a deadline of January 1, 2025. Different timelines apply to LLCs created on or after January 1, 2024
The filing process is done electronically through the Financial Crimes Enforcement Network (FinCEN) website, with no filing fee.

Updates and Corrections:
Any changes in beneficial ownership or reported information must be updated within 30 days. Exemptions can also be reported, and corrections for inaccuracies are necessary within the same timeframe.

Access to Reported Information:
Importantly, reported beneficial ownership information is not made public. FinCEN can disclose it only to specific authorized entities for designated purposes, including law enforcement and regulatory oversight.

Understanding and complying with beneficial ownership reporting requirements is crucial for LLCs, insuring transparency and contributing to the prevention of financial crimes. Regular updates and adherence to the filing timelines are essential to maintain compliance with evolving regulations.

Posted in White and Associates