FinCEN Clarifies that Dissolved Entities are Subject to Beneficial Ownership Reporting
July 8, 2024
On July 8, 2024, the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) has updated their Frequent Asked Questions (“FAQs”, see C.12-C.14 and D.17 [1]) , where they clarify that the Beneficial Ownership Information (“BOI”) Rule requires Reporting Companies that exist on or after January 1, 2024, to file a report even if they fully dissolve prior to their initial reporting deadline.
According to the Corporate Transparency Act, an U.S. entity created by filing with a Secretary of State or any similar office or tribal jurisdiction, or an entity formed under the laws of a foreign country and registered to do business in any State or tribal jurisdiction in existence on or after January 1, 2024 is a Reporting Company and is subject to the BOI Rule (“Reporting Company”). A Reporting Company must file the initial BOI report within applicable deadline (90 days from creation or registration for Reporting Companies formed or registered during 2024, and 30 days from creation or registration for Reporting Companies formed or registered on or after January 1, 2025).
Previously, there was uncertainty regarding whether entities that dissolved before their reporting deadlines were still required to submit such reports. Based on the updated FAQs, a company “entirely completed” the process of “formally and irrevocably dissolving” before January 1, 2024, is not subject to file a BOI report, which means certain dissolving or dissolved Reporting Companies still need to file a BOI report:
(a) Reporting Companies that started but did not entirely complete the process of formally and irrevocably dissolving before January 1, 2024; and
(b) Reporting Companies formed after January 1, 2024, that dissolves before its filing deadline is due.
Therefore, Reporting companies that began the dissolution process in 2023 must consider whether that process was fully completed prior to January 1, 2024. If not, they must file an initial report even if now fully dissolved. According to the guidance of FinCEN, a company typically completes the process of formally and irrevocably dissolving by, for example, filing dissolution paperwork with its jurisdiction of creation or registration, receiving written confirmation of dissolution, paying related taxes or fees, ceasing to conduct any business, and winding up its affairs (e.g., fully liquidating itself and closing all bank accounts).
Reporting companies are advised to continue to monitor FinCEN's website for periodic updates to its FAQs about the BOI Rule. They may consider consulting outside counsel if they have questions related to the BOI reporting issues.