Tag: banking and finance
On February 18, 2025, the U.S. District Court for the Eastern District of Texas, in Smith, et al. v. U.S. Department of the Treasury, et al., 6:24-cv-00336 (E.D. Tex.), stayed its own January 7, 2025 order that stayed FinCEN’s regulations implementing the beneficial ownership information (“BOI”) reporting requirements under the Corporate Transparency Act. As a result of this recent order, BOI reporting requirements are now back in effect. Please refer to our previous client alert on the BOI reporting requirements at Client Alert: FinCEN's Beneficial Ownership Reporting Rule.
Who Needs to Report?
All companies that (i) meet the definition of “reporting companies” and (ii) are not eligible for an exemption, must file BOI reports.
“Reporting company” means either a domestic reporting company or a foreign reporting company:
- A “domestic reporting company” is any entity that is a corporation, limited liability company (LLC), or other entity formed by the filing of a document with a secretary of state or similar office under the law of a state or Indian tribe.
- A “foreign reporting company” is any entity that is a corporation, limited liability company, or other entity formed under the law of a foreign country, and registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or similar office under the law of the state or Indian tribe.
The definition above would capture limited liability partnerships, limited liability limited partnerships, business trusts, and most limited partnerships. Legal entities that are not created by the filing of formation documents with a government agency, including certain trusts, are currently excluded from the definition of “reporting company” and not subject to the BOI reporting requirement.
Other entities exempted from the BOI reporting requirements include, among others, large operating companies that:
- Employ more than 20 full-time employees in the U.S. (generally working at least 30 service hours per week);
- Maintain an operating presence at a physical office within the U.S. that is not shared other than with the reporting company’s affiliates; and
- Have filed a prior year federal income tax return reporting over $5 million in gross receipts or sales. For entities filing consolidated returns, the entities must use the amount reported on the consolidated return for the group.
New Filing Deadline
- For most reporting companies, the new deadline to file an initial, updated, and/or corrected BOI report is now March 21, 2025.
- Reporting companies formed or registered on or after February 18, 2025 must file within 30 days from the date of creation or registration.
- Reporting companies that were previously given a reporting deadline later than the March 21, 2025 deadline must file by that later deadline.
For more information on the applicable exemptions, beneficial owner identification, information to be reported, and non-compliance consequences, please refer to our previous client alert on the BOI reporting requirements at Client Alert: FinCEN's Beneficial Ownership Reporting Rule.
What’s Next?
Companies potentially subject to the BOI reporting requirements, including those formed in or registered to do business in the U.S., should start identifying beneficial owners and start collecting requisite information. Companies can also review the FAQ (https://www.fincen.gov/boi-faqs) and Small Entity Compliance Guide (https://www.fincen.gov/boi/small-entity-compliance-guide), which comes in various languages, including traditional and simplified Chinese, published by FinCEN, for guidance on compliance with the BOI reporting requirement.
In light of the implementation of this new beneficial ownership reporting regime and the adverse consequence of non-compliance, we encourage you to reach out to your usual KWM contacts for further information and assistance.
Disclaimer:
This client alert is prepared for general information only. It is not a comprehensive analysis of the matters presented, and is not intended and should not be relied upon as legal advice. We disclaim any responsibility or liability to anyone, irrespective of past, current or potential client relationship, in connection with this client alert.
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