FinCEN Clarifies When Dissolved Entities Need to File BOI Reports
The Financial Crimes Enforcement Network (FinCEN) published updated Frequently Asked Questions (FAQs) on July 8. They clarify the beneficial ownership information (BOI) reporting requirements for certain reporting companies that have been dissolved or otherwise ceased to exist before the Jan. 1, 2024, effective date of the Corporate Transparency Act (CTA). This leaves questions about reporting requirements for businesses in the process of fully dissolving.
FinCEN’s guidance confirms that a company “formally and irrevocably” dissolved before Jan. 1, 2024, is not subject to CTA reporting requirements and thus is not required to file a BOI report. However, a reporting company in existence for any period in 2024 – i.e., a reporting company that was not “formally and irrevocably” dissolved before Jan. 1, 2024 – is required to file a BOI report. This means a reporting company that started but did not entirely complete the process of formally and irrevocably dissolving before Jan. 1, 2024, must file a BOI report. The same is true for an entity formed after Jan. 1, 2024, that dissolves before its CTA filing deadline. But questions remain about when a company is fully dissolved.
Per FinCEN, a company typically completes the process of formally and irrevocably dissolving by filing dissolution paperwork with its jurisdiction of creation, receiving written confirmation of dissolution, paying any taxes or fees owed, ceasing to conduct any business, and winding up its affairs. A key consideration for FinCEN appears to be whether the dissolving company has fully liquidated and closed its bank accounts.
The answer depends on the laws of the jurisdiction where the entity was formed or registered. Because these laws vary, reporting companies should consult applicable state or tribal law to determine when a dissolved company ceases to exist as a legal entity. Note that under this guidance, an entity that has been administratively dissolved or terminated (e.g., for failure to file reports or pay fees) has not necessarily ceased to exist, as states typically allow for reinstatement within a specified time period.
While FinCEN’s new guidance clarifies the reporting requirements for reporting companies that have dissolved or ceased to exist, it does not identify who is charged with preparing and filing the BOI report or what information must be reported by a reporting company that no longer exists as a legal entity. As a practical matter, reporting companies intending to dissolve should consider their BOI obligations under the CTA as part of their dissolution proceedings.
Please contact Hal West, Trevor Haynes or any member of Phelps’ Business team with questions or for advice and guidance.
