Beneficial Ownership Information Act Filing Requirements

A new filing at a new place for your LLC

by/ EDWARD WILHELM AND JACK WILHELM

On Jan. 1, 2024, millions of U.S. businesses became subject to the Corporate Transparency Act, which requires domestic and foreign businesses to provide certain beneficial ownership information within prescribed deadlines to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network. There are 23 exemptions to the CTA’s reporting requirements; however, we suspect that if you are a member of a limited liability company and are still reading this article, your domestic entity — your limited liability company — is required to make this relatively easy filing, known as Beneficial Ownership Information Reporting or BOIR. It is projected that somewhere in the neighborhood of 27 million to 32 million businesses are subject to this filing requirement.

“The launch of the United States’ beneficial ownership registry marks a historic step forward to protect our economic and national security,” said Secretary of the Treasury Janet Yellen. “Corporate anonymity enables money laundering, drug trafficking, terrorism and corruption. It harms American citizens and puts law-abiding small businesses at a disadvantage. Having a centralized database of beneficial ownership information will eliminate critical vulnerabilities in our financial system and allow us to tackle the scourge of illicit finance enabled by opaque corporate structures.”

The filing is not particularly difficult. If you are a member of a limited liability company, a limited liability partnership created by a filing with a state secretary of state, or a Subchapter S corporation, you should visit fincen.govto determine whether you are supposed to file a beneficial ownership information report and, if so, how to so do. Then, of course, you should file. 

Generally, reporting companies must provide four pieces of information about each beneficial owner:

• Name.
• Date of birth.
• Address.

Identifying number and issuer from either a nonexpired U.S. driver’s license, a nonexpired U.S. passport, or a nonexpired identification document issued by a state (including a U.S. territory or possession), local government or Indian tribe. An image of the document must also be submitted. Most of the time it will be your driver’s license.

The company must also submit certain information about itself, such as its name(s), address and state of incorporation. In addition, reporting companies created on or after Jan. 1, 2024, are required to submit information about the individuals who formed the company — the “company applicants.”

In our experience, it took about an hour the first time we made the filing and less than 15 minutes for each subsequent filing. Obviously, for a small fee, an attorney can do this for you — or you can go online to see if you need to do it yourself. Also, there are companies that will make filings on your behalf, including SingleFile (singlefile.io).

By way of background, the law was the result of a bipartisan bill. Among other things, the reported purposes of the fact gathering include:

• Preventing money laundering, tax evasion and other illicit financial activities by ensuring the true owners behind entities are known.
• Promoting greater accountability in corporate governance.
• Identifying where decisions are made and who should be held accountable.
• Minimizing risk by understanding the risks associated with customers or third parties.
• Avoiding reputational damage and legal liability by discovering critical beneficial ownership information.
• While we are offering no opinion as to the necessity or advisability of the law, it is the law, and it is best to “hunker down” and comply. That is what we are advising our clients.
• Like with most federal laws, there are penalties for not complying, including:
• Civil penalties of up to $500 per day for each day the violation continues.
• Criminal penalties of up to $10,000 or imprisonment for up to two years.

We do not know how lax or stringent the Department of the Treasury will be in its enforcement. However, one way to find out is to not make the filing. We prefer not to be the “guys who find out.”

ABOUT THE AUTHORS

Edward Wilhelm and Jack Wilhelm, partners at Wilhelm Law Firm, provide assistance with oil and gas activities, corporate law and a host of other areas of the law.

DISCLAIMER: This article is not intended to and does not offer legal advice, legal recommendations or legal representation on any matter. You need to consult an attorney in person for legal advice regarding your individual situation. 

UPDATE: As an aside, there have been numerous judicial contests of this law, arguing mainly that the act violates the US Constitution. On Dec. 3, 2024, the U.S. District Court for the Eastern District of Texas entered a preliminary injunction suspending enforcement of the Corporate Transparency Act and its implementing regulations nationwide, concluding that the CTA is likely unconstitutional as it is outside Congress’s power. At press time, at least four other federal courts have proceedings pending before them. Some are concluding the statute to be constitutional; some are not. The breath and scope of the Texas preliminary injunction is unclear, and likely, will be challenged. We can only speculate as to the likelihood of the law remaining in place and being withheld. It may take years to sort all of this out. You should consult with your legal counsel if you plan to rely upon this preliminary injunction and not file.