8978.01 / What FinCEN reporting requirements apply to LLCs and other small business entities starting in 2024?
Editor’s Note: On March 1, 2024, the federal district court for the Northern District of Alabama ruled that the Corporate Transparency Act (CTA) that created the new FinCEN BOI reporting requirements was unconstitutional. The court granted an injunction on enforcement, but that injunction only applies to the plaintiffs (including members of the National Small Business Association (NSBA) and, presumably, reporting companies in the Northern District of Alabama.1 It seems almost certain that the government will appeal and the AICPA has advised small business to continue to comply.
FinCEN has recently created new beneficial ownership reporting obligations that apply to all domestic reporting companies (including corporations, LLCs, limited partnerships and any entity formed by filing a document with a secretary of state in the U.S). The company's beneficial owners must be identified and reported to FinCEN in an effort to control money laundering and other criminal activity committed through shell companies and other opaque business structures. A "beneficial owner" is a natural person who either 1) exercises substantial control over the company or 2) owns or controls 25% or more of the ownership interests in the company (whether directly or indirectly).
When making the determination of whether an individual owns or controls 25% of the business, the individual's options, convertible instrument and other similar equity rights are treated as though they have been exercised.