“Beneficial Interest” Reporting Requirements for Limited Liability Companies and Other Small Businesses

Congress has enacted new reporting requirements for limited liability companies that impact almost anyone who has an interest in a limited liability company (“LLC”) or other small business, or who is a senior officer of a limited liability company. 

Congress created the new reporting rules to combat money laundering and terrorism by making it more difficult for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.  The reporting requirements were created by the Corporate Transparency Act (“CTA”), which passed in 2021 with bipartisan support.  

The CTA requires most limited liability companies and other small businesses to submit a Beneficial Ownership Information Report (“BOIR”) to the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”).  The most important take-aways are: (1) almost everyone who owns or controls a limited liability company must report their “beneficial interest” to FinCEN; (2) there are potential significant civil and criminal penalties for not reporting; and (3) reporting must be done by the following deadlines:

• January 1, 2025, if the LLC was in existence prior to January 1, 2024
• Within 90 days of establishing the LLC with the Sectary of State for entities formed on or after January 1, 2024
• Within 30 days of establishing the LLC with the Sectary of State for entities formed on or after January 1, 2025
• Within 30 days if at any time the LLC discovers an inaccuracy in a previously filed report or if there is a change to previously reported information, including a change in beneficial ownership, or a change in the contact information of beneficial owners

Although this sounds ominous, the beneficial interest reporting process is relatively simple and can either be done online at https://boiefiling.fincen.gov/or by completing a PDF and uploading it on the FinCEN website.  The information you are required to provide includes basic information about the limited liability company, such as the name of the LLC, state of formation, tax identification number, and address of the company, and basic information about yourself (the beneficial owner), such as your name, date of birth, and residential address.  The beneficial owner is also required to upload a photo of an “identifying document” such as a driver’s license or passport. 

If you have an interest in more than one limited liability company, you can obtain a “FinCen ID,” which enables you to simplify the reporting process.  You input your beneficial owner information once and then obtain a unique identifying number (a FinCen ID) that you can report instead of completing the beneficial owner information for each LLC.

Some limited liability companies and small businesses are exempt from the new reporting requirements. Exempt entities include: (1) large companies with 20 or more full-time employees; (2) companies with more than $5 million in revenue; and (3) certain types of entities that are already subject to significant government regulations such as banks or other financial institutions.  Here is a link to the full list of exempt companies.

For more information, please refer to FinCEN’s Small Business Compliance Guide. FinCEN’s website has an excellent Q&A section on the new reporting requirements.