As 2024 draws to a close, the beneficial ownership information reporting deadline is looming fast for existing reporting companies. This requirement was imposed by the Corporate Transparency Act (CTA) that was passed by Congress as part of the Anti-Money Laundering Act of 2020, an effort to fight money laundering and other illegal activities that have been facilitated by allowing criminals to hide their involvement in shell companies, and applies not only to US.-based reporting companies but also to reporting companies formed in other countries, or whose owners are based abroad. While the aim of the law is clear, the answers around who is required to comply have been less so. For foreign individuals unaccustomed to providing personal identifying information in conjunction with their companies doing business in the US, they may be surprised by who is considered a beneficial owner and unclear on how to meet their compliance requirement.
Adding to this problem is the fact that many cross-border legal structures are quite complex if they are designed to maximize tax efficiency and legal protection for unique individual circumstances. This can make it tricky for foreign investors to determine what information needs to be provided to avoid steep fines and possible exposure to criminal penalties if they fail to file accurately and on time.
Key Steps to Meeting BOI Reporting Requirements
Ideally, enterprises that fall within the definition of a reporting company according to the CTA have already been in consultation with a US-based law firm. (While other types of professionals can file BOI reports, accountants may not be willing to, as doing so could be considered an unauthorized practice of law, according to the American Institute of Certified Public Accountants.) That inquiry should be with an experienced attorney with expertise relevant to that type of business. Establishing attorney/client privilege with the attorney selected will ensure that business information remains confidential. The attorney will need to analyze the corporate structure of the enterprise to determine which individuals meet the legal definition of beneficial owners and are thus required to report.
After this list is assembled, the appropriate information will need to be collected from every person who must be reported as a beneficial owner and the report filed with the Beneficial Ownership Information (BOI) Reporting Database. These steps may sound straightforward, but even in relatively simple cases it can be time-consuming to accurately assemble the required information. Maintaining compliance also requires ongoing monitoring, as any changes in beneficial ownership require updated filings within strict deadlines. A foreign reporting company will need to establish an ongoing relationship with a US-based law firm to ensure an updated filing will be handled promptly and appropriately if changes to beneficial ownership occur.
BOI Filing for New Foreign Reporting Companies
While certain legal challenges have been filed questioning the obligation to file BOI, as these cases are pending in the court system the Financial Crimes Enforcement Network (FinCEN) has affirmatively stated that reporting companies are still required to comply with the CTA. This means that after January 1, 2025, new foreign reporting companies created or registered to do business in the US will be required to file their initial BOI report within 30 calendar days of receiving notice their creation or registration is effective; in 2024, this deadline was extended to 90 days to accommodate the adjustment to the new requirement. Those intending to expand into the US in 2025 should plan for BOI filing as they are registering to ensure the report can be filed accurately and on time.
Expert Legal Assistance for Businesses Entering the US Market
Since 2023, Bridge Law LLP has been proactively reaching out to our clients to help them understand their obligations under the CTA and to complete any required BOI reports in the appropriate time frame. We have extensive expertise in helping international businesses comply with all applicable US regulatory requirements as well as providing the legal support necessary to achieve their business goals. We can answer your questions about the CTA today and assist with ongoing compliance in the future. To schedule a consultation, contact us here today.