Many pilots, flight instructors, mechanics, manufacturers, aircraft dealers and other aviation-related businesses choose to establish entities, like limited liability companies (LLCs), to own aircraft or operate their businesses. The vast majority of these aviation-related businesses will be required to report BOI to FinCEN unless the entity fits one of the limited exemptions in the rule.
To recap, FinCEN promulgated the BOI rule on September 30, 2022. The BOI rule will require millions of entities, including many owning aircraft or conducting aviation-related business, to file a report with FinCEN identifying all “beneficial owners” no later than January 1, 2025. A “beneficial owner” is any individual who owns or controls at least 25% of the entity or anyone who, directly or indirectly, has “substantial control” over the entity. It is important to recall that determining who has “substantial control” is no easy task and requires entities to carefully review the BOI rule to identify anyone who can make important decisions on behalf of the entity based on FinCEN’s established criteria.
Entities created or registered to conduct business in the U.S. on or after January 1, 2024, must report BOI and information concerning any “company applicant”—the individual who actually filed the documents creating or registering the entity and the person who was primarily responsible for directing or controlling the filing. These entities must file the BOI reports, which must include company applicant information, within 30 days of their creation or registration to do business in the U.S. However, FinCEN recently proposed to extend this deadline, but only for companies created or registered to do business in the U.S. in 2024.
Between currently existing entities and those created or registered in the new year, FinCEN estimates that 32.6 million entities will be required to submit a BOI report in 2024. Every year thereafter, FinCEN estimates nearly 5 million new entities will be created or registered to do business in the U.S. and required to file BOI reports. On top of initial reports, FinCEN estimates 6.6 million entities will need to file updated BOI reports in the first year, and 14.5 million will need to file updated reports each year thereafter—largely because the BOI rule requires reporting companies to keep their information up to date.
In a recent flurry of activity, FinCEN has published some helpful resources for small entities, including its Small Entity Compliance Guide and a Quick Reference toolkit. However, FinCEN has yet to issue a final rule concerning access and safeguards for the BOI required to be reported by tens of millions of entities even though it issued a proposed rule in December 2022. We can reasonably expect that certain financial institutions and government agencies will have access to BOI. But we do not know exactly how access will be granted or what safeguards will be put into place to ensure access is limited to those who need to know BOI or that BOI is requested for legitimate purposes.
Further, FinCEN has yet to publish even a proposed rule for amending its customer due diligence requirements for financial institutions as required by the Corporate Transparency Act. The Act will likely require certain financial institutions to verify BOI before conducting business with entities required to report it.While there are plenty of unanswered questions, we know for sure that tens of millions of entities will be required to report BOI to FinCEN starting January 1, 2024. If you own an aircraft through an entity or engage in an aviation related business through one, you must ensure that you timely file any required BOI with FinCEN. Failure to do so could result in severe penalties.