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  • Writer's pictureCherie Larson

New Beneficial Owner Reporting Requirements

What Small Businesses Need to Know

While you’ve been busy running your business, you might have overlooked the new Beneficial Ownership Information Reporting (BOI) requirement that took effect on January 1. This requirement involves filing with the Financial Crimes Enforcement Network (FinCEN), a government agency under the U.S. Treasury Department. FinCEN is tasked with safeguarding our financial system, part of which involves finding and stopping money laundering activities. The Corporate Transparency Act (CTA), passed by Congress in 2021, mandated FinCEN to oversee these informational reporting requirements to help prevent illegal money transfers.

Who Must Register?

If your business required filing documents with the secretary of state to become active, such as LLCs, Partnerships, S-Corporations, C-Corporations, and some trusts, you might need to file. There are exemptions to who must register, so it’s recommended that you carefully research before deciding. Typically, exemptions include entities that are already highly regulated and larger entities that satisfy ALL of the following criteria:

  • Employing more than 20 full-time employees in the US,

  • Having a physical office in the U.S.,

  • Filing a federal income tax return last year showing more than $5 million in gross receipts or sales.

Defining Beneficial Owners and Company Applicants

Beneficial owners are identified as individuals who own 25% or more of the equity interests of the business or who exercise substantial control over the business. Determining who has substantial control can be more complex, especially as this is a new requirement with no historical rulings for guidance.

Company applicants include the individuals who filed the incorporation documents with the secretary of state or those primarily responsible for controlling the filing process, such as a legal or accounting professional assisting with the filing. It’s important to note that only businesses that were registered on or after January 1, 2024, need to include company applicants in their registration.

Required Information

The registration itself is straightforward, requiring basic information about the beneficial owners, like their full legal name, date of birth, current address, and identification number from a document such as a U.S. passport or driver’s license. Identifying the correct individuals to provide information for is the challenging part.

Registration Deadline

Businesses formed in 2024 must register within 90 days of their formation date. The penalties for failing to comply are steep—up to $500 per day. For businesses already in existence at the beginning of 2024, the deadline to file is December 31, 2024.

Final Thoughts

For businesses starting in 2024, it's crucial to complete your registration promptly. If your business was established before 2024, consider waiting until later in the year to register, as we anticipate further clarifications on the definitions of beneficial owners. Remember, any changes regarding beneficial owners must be reported within 30 days to avoid penalties. This underscores the importance of keeping your registration information up to date. For more detailed guidance, check out the FinCEN comprehensive compliance guide.

Be cautious of services that offer to manage this process for a substantial fee. Your small business lawyer or accountant can provide reliable advice. We're also here to discuss these changes, though we won't be handling filings directly!


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