Table of Contents
What Defines a “Reporting Company” Under FinCEN’s Final Rule?All companies and businesses created in the United States by filling documentation with the secretary of state, or any similar office under the law of a State or Indian Tribe, will be considered a domestic reporting company. The “reporting company” includes any corporation, large or small, limited liability company (LLC), limited partnership (LP), and statutory trust. Also, any company from a foreign country that registers to do business in any U.S. State or Tribal jurisdiction by filing documentation with a secretary of state, or similar office of the state or Indian Tribe, will be considered a foreign reporting company. However, as clarified in the final rule, general partnership, certain types of trusts, and sole proprietorships are excluded from FinCEN’s definition of a “reporting company” since they are not created through documentation filed with a secretary of state. Although they have likely registered for a business license or permit to operate, such documents do not “create” the company. Other companies, or entities, the Reporting Rule exempts from the CTA and not required to submit BOI reports to FinCEN are:
- Issuers of securities registered under Section 12 of the Securities Exchange Act of 1934 (1934 Act) or those who must file supplementary and periodic information under Section 15(d) of the 1934 Act.
- Governmental authority that acts on behalf of the U.S. or any such Indian Tribe, State, or political subdivision.
- Credit unions.
- Bank holding companies.
- Money services business registered with FinCEN
- Brokers or dealers registered with the Securities Exchange Commission (SEC) per Section 15 of the 1934 Act.
- Public companies registered with the SEC under the 1934 Act.
- Investment companies or advisors registered under the Investment Advisers Act of 1940.
- Venture capital fund advisor.
- Insurance Companies.
- State-licensed insurance producer.
- Public accounting firms registered under Section 02 of the Sarbanes-Oxley Act of 2002
- Public Utility – providing telecommunication services, electric power, natural gas, or water services within the U.S.
- Large Operating Companies – which have more than 20 full-time employees in the U.S., a federal income tax return filed in the year prior with more than $5 million gross sales or receipts, and an operating presence in the U.S.
- Inactive entities – has not engaged in active business for over one year, not owned by a foreign person, has not changed ownership or received or sent more than $1,000 in the previous 12 months, does not hold any assets including an ownership in any corporation, LLC, or other similar entity.
What is a FinCEN Identifier?A FinCEN Identifier is a unique number issued by FinCEN, upon request, to individuals after they provide their BOI and to reporting companies after they file their initial BOI reports. Obtaining a FinCEN Identifier, although not mandatory, can allow entities or individuals to simplify the reporting process and reference the identifying information of a reporting company previously provided to FinCEN much more efficiently. In place of submitting an individual’s BOI, the Final Rule incorporates changes to clarify the circumstances that allows reporting companies to use “another entity’s” FinCEN Identifier and full legal name. Following these changes to the Final Rule, the 31 CFR 1010.380(b)(4)(ii)(B) will read as follows:
- The reporting company has been provided with the other entity’s FinCEN Identifier.
- An individual is or may be a beneficial owner of the reporting company by virtue of an interest in the reporting company that the individual holds through an ownership interest in the other entity; and;
- The beneficial owners of the other entity and the reporting company are the same individuals.
Who is a Beneficial Owner?A “Beneficial Owner” of a reporting company, required to file a BOI report, is any individual who exercises substantial control over a reporting company or owns or controls at least 25 percent of its ownership interests, directly or indirectly. A BOI report requires the reporting company to provide personal identifying information about each of its beneficial owners, this includes:
- Full legal name.
- Date of Birth.
- Current residential address.
- An identifying number from a driver’s license, state ID, passport, or FinCEN identifier.
- An image of the identifying number document.
What Constitutes Substantial Control?Substantial control gives an individual the authority to decide on important matters regarding the reporting company. Individuals that can exercise authority over an entity by substantial control are those who:
- Serve the reporting company as a senior officer such as a CEO, CFO, COO.
- Have the authority over the appointment or removal of any senior officer or a majority of the board of directors of the reporting company.
- Directs, determines, or have substantial influence over important decisions made by the reporting company including: Entry into and termination of contracts; acquisition, sale or lease of the company’s principle assets; Reorganization, dissolution, or merger; selection or termination of business lines or venture; and the amendment of any governance documents of the reporting company.
What is a Company Applicant?A company applicant for a domestic reporting company is the individual who directly files the document that creates the company. A company applicant for a foreign reporting company is the individual who directly files the document that first registers the foreign company. A company applicant’s primary responsibility is directing or controlling the filing if more than one individual is involved in the document filing for the domestic and foreign reporting company. The reporting company must provide the same personal identifying information about company applicants that a BOI report requires for beneficial owners with an exception regarding street address. The reporting company must submit the company applicant’s residential street address unless the individual engages in corporate formation as a legal or corporate formation agent, and files the formation or registration document during that business. Then the reporting company needs to submit the current street address of the company applicant’s business. For example, if a paralegal is the company applicant, and they file the document at their law firm, the reporting company must report the business address of the law firm.
What Information Does a Reporting Company Need to Provide About Itself?Aside from the identifying information of the beneficial owners and company applicants, the reporting company will be required to provide the following information about itself:
- Their full legal name and any “trading as” (t/a) or “doing business as” (d/b/a) names.
- The current address of their primary place of business in the United States; or if they are a foreign reporting company, the current address from which they conduct business in the United States.