New Federal Reporting Requirement for U.S. Businesses!

Apr 09, 2024

What You Need to Know About the New Requirement

Attention business owners! Effective Jan. 1st, A new federal reporting requirement mandates over 32 million business owners across the United States to file a Beneficial Ownership Information Report with the Financial Crimes Enforcement Network (FinCEN). This pivotal move is a direct outcome of the 2021 Corporate Transparency Act, which is strategically designed to combat the rising tide of money laundering and the circulation of illicit funds.

The law targets a broad spectrum of business entities, encompassing companies, partnerships, estate and benefit plans, as well as foreign corporations operating within the U.S. These entities are required to disclose the identities of their beneficial owners, defined as individuals who either own at least 25% of the equity interests in the entity or have significant control over the entity's operations. It's important to note, however, that the legislation provides exemptions for several types of businesses. This includes banks, credit unions, tax-exempt entities, and larger companies, which are not required to comply with this new mandate.

What Goes In the Report?

The required report is comprehensive. It must include the company's legal and trade names, physical address, state of formation, tax identification number, and an image of the articles of incorporation. Each named beneficial owner must also provide detailed personal information, including their name, birthdate, address, and a photocopy of a valid identification document.

Filing, and Penalties for Intentionally Incorrect Information

For existing companies, there is a grace period extending until January 1, 2025, to file this report. Meanwhile, new entities formed after the law comes into effect must ensure they file within 90 days of their creation. All reports are to be submitted through FinCEN's official website, ensuring a streamlined process.

If you intentionally provide incorrect information, the penalties are serious, including fines up to $10,000 and/or two years of imprisonment. Given the complexity and the serious implications of non-compliance, it's strongly recommended for business owners to seek professional guidance. Consulting with a certified public accountant, attorney, or a seasoned business advisor can provide invaluable assistance to your business, ensuring that you remain in good standing.

Does My Business Need to File?

Corporations, pass-throughs, partnerships, estate and benefit plans, and foreign companies registered in the U.S. or Indian tribe will have to file the beneficial ownership information report. For more information on who is exempt and who is now, please refer to FinCEN’s compliance guide.

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