New Beneficial Ownership Reporting Requirements
Authored by: Charlie Miracle, CPA – Financial Advisor – Member – Director of CAS
Now that our calendars have turned to 2024, many small businesses, private companies, and other entities are now required to file their beneficial ownership information (BOI) with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
The Corporate Transparency Act (CTA), enacted by Congress in 2021, requires reporting companies, both foreign and domestic, that file incorporation paperwork with secretaries of state or tribal authorities to also file BOI with FinCEN.
The registry is designed to assist FinCEN and law enforcement in understanding who owns corporations and shell companies to help locate and capture parties responsible for money laundering, financing terrorist groups, and other financial crime.
As we step into the new year, business owners should familiarize themselves with these reporting obligations. Here’s what you need to know.
Reporting Requirements:
Starting January 1, 2024, corporations, limited liability companies (LLCs), or any other entities created in the U.S. by filing with the Secretary of State are obligated to report information about individuals who own or control the company.
Exemptions:
While the reporting mandate is broad, there are 23 exemptions outlined in the legislation, which includes large operating companies, public companies, banks, credit unions, broker-dealers, securities exchanges, investment advisers, venture capital fund advisers, insurance companies, Commodity Exchange Act registered entities, accounting firms, public utilities, tax-exempt entities, inactive entities, and other very specific exempt business types.
Large operating companies are defined by FinCEN as having 20 or more full-time U.S.-based employees, having physical operations in the United States, and having generated more than $5 million in gross receipts or sales on their most recent federal income tax return. It is crucial for businesses to thoroughly understand these exemptions to determine whether they qualify for relief from filing requirements.
Transition Period:
Companies formed before January 1, 2024, have until January 1, 2025, to submit their initial beneficial ownership reports. On the other hand, entities created on or after January 1, 2024, are subject to a tighter reporting timeline.
Reporting Deadlines:
- For companies created before January 1, 2024: Reports must be submitted by January 1, 2025.
- For companies created on or after January 1, 2024: Reports must be submitted within 90 days of creation.
An exception exists for entities created on or after January 1, 2025, where reports must be submitted within a more stringent 30-day window.
Information Resource:
The Financial Crimes Enforcement Network (FinCEN) provides a comprehensive source of information about beneficial ownership reporting. Businesses can access additional details and resources at FinCEN's Beneficial Ownership Information.
Professional Guidance:
It’s essential to work with your attorney to determine potential filing requirements. Attorneys play a pivotal role in ensuring that the correct forms are filed, navigating exemptions and avoiding potential legal pitfalls.
The Corporate Transparency Act indicates a significant shift in the regulatory landscape for small businesses. As we enter the era of increased corporate transparency, it’s imperative for companies to understand their reporting obligations, explore exemptions, and engage legal professionals to navigate the complexities of compliance. If you have any questions, please don’t hesitate to reach out to our team at (509) 663-1661 or email us at info@cnccpa.com.
Source: Compliance Week, 2024
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