Key Takeaways

• Starting in 2024, many entities that are created in or registered to do business in the United States will be required to file BOI reports with FinCEN.
• With the effective date fast approaching, criticism surrounding treatment of small businesses, who may likely be required to file a report, has become common for FinCEN.
• In response, FinCEN issued the Guide, which outlines what exactly constitutes a beneficial owner and emphasizes that properly identifying a beneficial owner is crucial in submitting a BOI report.

The U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) released a Small Entity Compliance Guide (Guide) aimed at assisting the small business community in understanding the beneficial ownership information (BOI) reporting rule under the Corporate Transparency Act (the CTA).

Criticism Surrounding Treatment of Small Businesses

Starting in 2024, many entities that are created in or registered to do business in the United States will be required to file BOI reports with FinCEN. With the effective date fast approaching, criticism surrounding treatment of small businesses, who may likely be required to file a report, has become common for FinCEN. Critics fear there is a lack of awareness in the small business community about the new rules and that there are not enough resources available for small businesses to navigate the rules.

In response, FinCEN issued the Guide. From helping small businesses better comprehend who qualifies as a beneficial owner to ensuring its company applicants are in line with the requirements, the Guide is intended to help small businesses determine if, when, and how they are required to file a report.

What Does the Guide Cover?

The Guide covers many essential aspects of the CTA that small businesses need to know in simple, easy-to-read detail. It outlines what exactly constitutes a beneficial owner and emphasizes that properly identifying a beneficial owner is crucial in submitting a BOI report. Additionally, the Guide provides detailed instructions on how to gather and document accurate information about beneficial owners, including suggesting best practices for verifying and validating beneficial owner information. For example, FinCEN recommends conducting due diligence searches and requesting supporting documentation from individuals claiming ownership or control over a company. The Guide also highlights the importance of maintaining up-to-date records and conducting regular checks to ensure ongoing compliance.

Furthermore, to help put the BOI requirements into practice, the Guide includes outlines of specific scenarios and interactive checklists that consider different types of entities and their unique considerations. Whether your company is a corporation, limited liability company, partnership, trust, or another type of entity, this Guide aims to offer specific guidance tailored to your situation.

Additional Guidance

Businesses should expect to see additional guidance and educational materials from FinCEN in the coming weeks, such as new answers to frequently asked questions, videos, infographics, and more compliance guides to help reporting companies comply with the new rules.

A complete copy of the Guide can be found here.