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Updated: November 29, 2023

How to ensure your business is in compliance with new federal reporting requirements

Starting Jan. 1, 2024, most U.S. businesses will have to report information about their “beneficial owners” — that is, the individuals who actually own or control a company — to a federal agency known as the Financial Crimes Enforcement Network.

Christopher Branson

Business owners and managers need to determine whether their businesses are covered or exempt from this reporting requirement and make a plan to ensure that the required reports are filed no later than Dec. 31, 2024. Failure to comply can result in both civil and criminal penalties.

Owners can educate themselves now to best prepare for the year ahead and take the following steps to ensure their business is well positioned to move forward when the program launches on Jan. 1.

Why is this change happening?

This new reporting requirement is a result of the Corporate Transparency Act enacted by Congress in 2021.

The required information for each person/entity will be filed with FinCEN and made available on request only to authorized users, including law enforcement, government agencies, and other select users. One purpose of this reporting is to prevent the hiding or laundering of funds and other assets through anonymous shell entities.

Which businesses need to report this information?

Every U.S. business must file a Beneficial Ownership Information Report (BOI Report) for each beneficial owner unless the business qualifies for one of a number of exemptions, which include, but are not limited to tax-exempt organizations and large businesses (more than 20 employees, more than $5 million annual gross revenue, and physical office in the U.S.), and some 20 or so other types of entities.

While a business may be exempt, FinCEN will likely require even exempt businesses to file an initial report claiming exempt status. Further, when a business loses its exempt status, it must file the BOI Reports within 30 days.

Who is considered a beneficial owner?

The definition of a “beneficial owner” for whom a report must be filed is both broad and complicated.  A “beneficial owner” is an individual who meets at least one of two criteria:

  • The individual exercises substantial control over the company; or
  • The individual owns or controls at least 25% of the ownership interests of the company.

While FinCEN has not yet identified exactly which positions within a company are considered a beneficial owner, it is likely to include officers, directors and any other individual who can vote on or otherwise influence decisions regarding the business or transactions involving the business. There will also be exceptions outlined.

Business owners can take the following steps now to be prepared to be in compliance:

  • Review materials available on the FinCEN website and follow along with updates from other trusted sources.
  • Designate a person within the business whose responsibility it is to ensure compliance with the FinCEN reporting requirements.
  • Enlist professional help if needed to ensure that the reports are properly and timely submitted.

The BOI Report requirement is new and regulations are still under development, so details and rules are subject to change. With that in mind, find a trusted resource who will continue to review information as it becomes available and will be able to assist you and your company in making all required filings.

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