September 2024

In July 2024, FinCEN updated a piece of guidance that affects reporting responsibilities of businesses that were created before January 1, 2024, but dissolved themselves on or after January 1, 2024. This affects pawn businesses that were sold to other entities including pawn companies if the company (legal entity or foreign entity doing business in the United States). This new guidance applies to legal entities that dissolved in calendar 2024 or will dissolve in calendar 2024. It reverses prior guidance that FinCEN had issued.

We share this because of the many acquisitions of pawn companies that were in the news in calendar 2024. If you sold a pawn company in 2024 that you or a predecessor in interest created before January 1, 2024, in calendar 2024 you owe a beneficial ownership report to FinCEN prior to December 31, 2024. This is the rule even if your company ceases to exist before the company’s first beneficial ownership report was filed. The FinCEN guidance appears here: https://www.fincen.gov/boi-faqs. You will see that questions and answers are grouped by the topic to which they relate, not by the date of issuance. These FAQs contain much useful information and make it easier to collect information in advance of your BOI Report submissions.

As of early July 2024, more than one million beneficial ownership reports had been filed with FinCEN.

Here are some important facts drawn from FinCEN’s July 2024 guidance:

1. A “legal entity” has obtained a certificate of incorporation from a State’s Secretary of State or has registered as a “limited liability company” (“LLC”), then it is a reporting entity and required to report a range of information about any person or entity that owns 25 % of more of the shares or has a controlling interest.

2. If your company ceased to exist as a legal entity before January 1, 2024, your company need not report its beneficial interest holders at the time prior to or at dissolution.

3. The issue of when a legal entity ceases to exist is complex. You will need to consult your local lawyer as to the requirements of any state or tribal reservation where the legal entity was created – that is, the jurisdiction that issued the corporation documents or where you registered your limited-liability company.

a. Jurisdictions’ laws differ on when a company “ceases to exist;” and,

b. Many jurisdictions treat a company as ceasing to exist only when it has taken every step necessary to dissolve formally and irrevocably. Examples include filing dissolution paperwork with the jurisdiction where the entity was created or registered, receiving written confirmation of dissolution from that jurisdiction; paying related taxes and fees; ceasing to conduct business in any manner; or winding up the entity’s affairs by fully liquidating the company and closing all bank accounts in the entity’s name.

4. Companies that face dissolution by administrative order or suspension of privileges of their corporate or LLC status have not ceased to exist under most state laws and have continuing reporting responsibilities until the order or suspension is terminated.

5. Companies that cease to exist under their state’s laws, for example, in 2024 will have reporting responsibilities under the new FinCEN guidance by December 31, 2024. They will have no future reporting responsibilities after that date – assuming that they filed the Beneficial Ownership Report before December 31, 2024 for 2024.

6. Companies created in 2024 but dissolved in calendar 2024 must file BOI reports. This guidance applies BOI reporting duties to entities formed as part of a transaction structure or corporate entities and LLCs formed in 2024 that also dissolved in 2024.

Remember: if you have questions about whether your company ceased to exist under the law of the jurisdiction that issued you a certificate of incorporation or an LLC, you need to consult your local lawyer.

This Update does not constitute legal advice in any jurisdiction.

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