New Ownership Reporting Rules to Take Effect

UK clients accustomed to Companies House reporting are often surprised to learn that, in the US, there is no database – public or otherwise – of the owners of US companies. In the US, the identity of corporate owners (or other persons with significant control) is considered a private matter, tracked only by the internal records of the corporation itself.

Effective January 1, 2024, however, new reporting rules will take effect which will require all domestic and some foreign corporations to report certain information about each 25% or more ultimate beneficial owner, each person with “substantial control” over the company, and each person(s) involved in registering the company (known as “Company Applicants”). Unlike in the UK, this information will not be publicly available. Instead, it will be available only to certain law enforcement agencies, financial institutions (with client consent), and tax authorities.

Generally, the reporting requirements apply to any business entity that has been created by, or registered with, a state registration authority (typically, the state’s “Secretary of State”). (Certain entities are exempt from the reporting requirements.) This would include UK private limited companies that have obtained from any State agency a certificate of authority to do business.

Each business entity must report its name, the street address of its principal place of business, its place of registration, and its tax identification number. In addition, for each 25% or more ultimate beneficial owner or person with “substantial control” over the company, the company must provide such person’s name, date of birth, address, and identification number (a UK passport number is acceptable), along with a copy of the identifying document. Similar information must be provided about Company Applicants for any company registered after January 1, 2024.

A person with substantial control includes any senior officer of the company, any person with the authority to appoint or remove a senior officer, or any other person with power to exercise substantial influence over important decisions affecting the business.

Any business entity registered prior to January 1, 2024 will have until January 1, 2025 to comply with the reporting requirements, which must be submitted through FinCEN’s online system (known as the “BOSS”). Entities registered on or after January 1, 2024, but before January 1, 2025, must comply with the reporting requirements within 90 days of creation. Entities registered on or after January 1, 2025 must comply with the reporting requirements within 30 days of creation. Moreover, any change to previously provided information – including, for example, a change in beneficial ownership, a change in persons with substantial control, or even a change in the previously provided identification for any such person – must be reported within 30 days of the change.

The failure to comply with the new reporting rules can result in a penalty of $500 per day (up to $10,000) and/or imprisonment up to 2 years.