This past week, I attended a FinCEN Info Session on Beneficial Ownership Reporting presented by Leslie S. Johnson at Ice Miller LLP. The session was enlightening and filled with essential information about new regulatory requirements. However, after the session, I reached out to several of my friends who own small businesses, and to my surprise, none of them knew about the new reporting requirements! One business owner who was in the session shared that they were already out of compliance and had no idea until now.

I’m writing this article to help small business owners avoid the negative impacts that could arise from missing these crucial deadlines. Small businesses are the backbone of our economy, and ensuring compliance is essential to protect their operations and sustainability.

Why This Matters:

The Beneficial Ownership Reporting rule, part of the Corporate Transparency Act (CTA) under the Anti-Money Laundering Act of 2020, is a new regulation that will impact many small businesses in the United States. It aims to curb illicit finance activities by requiring certain companies to report information about their beneficial owners—individuals who own or control the company.

While the regulation intends to increase transparency and combat financial crimes, the awareness of this requirement is low, and many small businesses are at risk of penalties as much as $500 a day and jail time. Reporting requirements started on January 1, 2024, now is the time to ensure compliance.

Who Has to Report? Any domestic or foreign entity registered to do business in the U.S., including corporations and limited liability companies, must report unless they fall under one of the 23 exemptions outlined in the regulation (e.g., publicly traded companies, nonprofits, and certain large operating companies).

What Information is Required? Companies must report identifying information about each beneficial owner and company applicant. This includes their full legal name, date of birth, current address, and a unique identifying number (e.g., driver’s license or passport).

When is the Deadline?

  • For companies created or registered before January 1, 2024, the deadline is January 1, 2025.
  • For companies created or registered on or after January 1, 2024, the deadline is within 90 days after creation or registration becomes effective.
  • For companies created or registered on or after January 1, 2025, the deadline is within 30 days after creation or registration becomes effective.

How to Report? Reports must be filed electronically through FinCEN’s secure system at www.fincen.gov/boi.

What Happens if I Don’t Report? Failing to report or providing false information can lead to civil penalties of up to $500 per day and criminal penalties of up to $10,000 and/or imprisonment for up to two years.

Steps to Take Now:

  1. Determine if Your Business is a Reporting Company: Review the compliance guide or consult with a legal advisor to see if your business meets the reporting criteria or qualifies for an exemption.
  2. Identify Your Beneficial Owners: Understand who exercises substantial control or owns at least 25% of your business. Remember, a reporting company may have multiple beneficial owners.
  3. Gather Required Information: Collect the full name, date of birth, address, and identification number for each beneficial owner and company applicant.
  4. File Electronically with FinCEN: Ensure your information is accurate and submit your report through FinCEN’s online portal.

Common FAQs:

  • What is a Beneficial Owner? A beneficial owner is anyone who owns or controls at least 25% of the company or exercises substantial control over the company’s decisions. This includes equity owners, Board of Directors, C-suite officers, and anyone else who has a role in major decisions affecting the company’s finances.
  • What is a Company Applicant? For a domestic reporting companies, the individual who files the document with the state and creates the domestic reporting company. This is typically the person who filed the articles of incorporation or organization with the secretary of state or similar office. It may be an attorney, paralegal, business owner, or any other person. For foreign reporting companies, the individual who files the document that first registers the foreign reporting company to do business in the United States is the company applicant. NOTE: An online filing agency is not typically considered a company applicant under FinCEN’s Beneficial Ownership Information (BOI) Reporting Rule unless a specific individual directly files the formation or registration documents.
  • Are there Exemptions? Yes, the rule exempts 23 types of entities, including large operating companies with over $5 million in gross receipts AND more than 20 employees AND a USA based office, OR certain financial institutions, and nonprofits. See guidance on the website.
  • What if My Information Changes? Companies must update or correct their reports within 30 days of any change in previously reported information.
  • I own multiple entities, is there an easier way to upload my information? Yes, obtain a FinCEN ID. This is a unique identifier number issued to an individual. By using a FinCEN ID, future updates are simplified as well.

If you’re a small business owner, it’s critical to act now to ensure compliance with these new reporting requirements. I encourage you to reach out to a legal or compliance professional to evaluate your business’s obligations under this rule.

Share this article to spread awareness, as we don’t want to see our small businesses blindsided by fines or penalties due to a lack of information.

Have questions or need more guidance? The rules and guidance updates keep coming. Follow the Financial Crimes Enforcement Network, US Treasury page for updates.