Effective January 1, 2024, many companies in the United States must report information about their beneficial owners—the individuals who ultimately own or control the company—to the Financial Crimes Enforcement Network (FinCEN), which is part of the U. S. Department of Treasury. The new law is designed to make it easier for US agencies to fight illegal activities such as money laundering and other financial crimes. This is not an income tax filing so it is not done with your tax returns.
Your company may need to report information about its beneficial owners if it is: (1) a corporation, a limited liability company (LLC), or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe; (2) a foreign company and was registered to do business in any U.S. state or Indian tribe by such a filing; and (3) it does not meet one of the 23 exemptions.
If your entity is not exempt, you need to report the beneficial owners for each entity. A beneficial owner is defined as any individual who (i) owns 25% or more of a reporting company or (ii) exercises “substantial control” over a reporting company. An individual exercises substantial control over a reporting company if the individual meets any of four general criteria: (1) the individual is a senior officer; (2) the individual has authority to appoint or remove certain officers or a majority of directors of the reporting company; (3) the individual is an important decision-maker; or (4) the individual has any other form of substantial control over the reporting company.
Each beneficial owner will need to report their full legal name, address, birthdate and upload a digital copy of an acceptable non-expired identification document. Typically, this is a U.S. Passport, State driver’s license or other identification document issued by a state, local government or tribe.
Penalties – A willful failure to report complete or updated beneficial ownership information to FinCEN or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in civil or criminal penalties, including civil penalties of up to $500 for each day the violation continues, or criminal penalties, including imprisonment of up to two years and/or a fine of up to $10,000. A person may be subject to civil and/or criminal penalties for willfully causing a reporting company not to file a required BOI Report or to report incomplete or false beneficial ownership information.
When to File – The beneficial ownership information reporting is not an annual requirement. After the initial report is filed, you are only required to update or correct information when it changes. A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial beneficial ownership information report. A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report. Changes to the initial information reported needs to be updated within 30 days of the change.
Filing Options – Filing through the FinCEN website yourself is simple, secure, and free of charge. If you choose to file the form yourself, you should familiarize yourself with the rules and instructions to determine if your entities are exempt from filing. FinCEN has issued a Small Entity Compliance Guide to walk you through the rules and process. You can access the guide at https://fincen.gov/boi/small-business-resources
If you don’t want to file the report yourself, there are a variety of providers that will help you analyze your filing requirements. You can ask your accountant/CPA, your legal counsel, various online websites, or your payroll providers.