New beneficial reporting requirements under the Corporate Transparency Act become effective January 1, 2024, and will require small business to report information about their owners.
Congress’s aim is to prevent criminals, terrorists, and “corrupt oligarchs” from laundering money or hiding property in the US through, but the new legislation will impose many new requirements on American small businesses.
Which companies have to file?
Essentially, any business making less than $5 million each year must file information with the Federal Crimes Enforcement Network (FinCEN) at: https://www.fincen.gov/boi. This includes LLCs, corporations, business trusts, and various types of partnerships. 501(c)(3) tax-exempt organizations and sole proprietorships are not required to report beneficial ownership information.
What do they have to file?
These businesses must file reports that identify two types of individuals: (1) “beneficial owners” and (2) individuals who created the entity or registered it to do business. The latter are called “applicants” and may be the business’s attorney. A “beneficial owner” is someone who has some level of control over the entity and/or owns at least a 25% interest in the entity.
For each beneficial owner and applicant, a business must report the person’s name, date of birth, current address, and a unique identifying number from some form of identification. Acceptable forms of identification include a passport, driver’s license, or other I.D. issued by a government. A picture of the I.D. must also be included in the report along with a statement of the jurisdiction that issued the identification.
If an individual provides those four pieces of information to FinCEN directly, they can receive a “FinCEN identifier.” The FinCEN identifier can then be provided in reports instead of listing all the other information.
In addition to reporting beneficial owner and applicant information, the company must include all its trade names and “doing business as” names, the address of its principal place of business, and its Employer Identification Number (EIN).
By what date do companies have to file?
Businesses that are created before January 1, 2024, will have one year to file their initial reports. Therefore, if you currently own a small business, you will have until January 1, 2025, to file the required ownership information with FinCEN. Businesses created after January 1, 2024, must file their initial reports within thirty (30) days of receiving notice that the business has been formed.
If there are any changes to the information required in a report (name, address, or number from identifying document of beneficial owners, applicants, or the company), an update must be given to FinCEN within thirty (30) days of the change.
How much does it cost to file?
FinCEN estimates that it will cost $85 for companies with simple ownership structures to prepare the report. There is no fee to file the report with FinCEN, so the only costs are in preparing the report. The reports will likely cost more if prepared by an attorney.
If you have questions or concerns about these new reporting requirements, make an appointment with us today. We will assist you in determining whether you need to file a report and if so, what to include in the report. We will also help you formulate new systems to ensure that you report all changes in leadership and ownership.