Attention business owners! Effective 1/1/2024, many businesses are now subject to a new requirement to file a report of Beneficial Ownership Information (BOI) with the Financial Crimes Enforcement Network (FinCEN). Small businesses – those with less than 20 full-time employees and/or less than $5 million in revenue – will be most impacted by this new filing requirement.
The requirement comes from the Corporate Transparency Act (CTA), enacted in 2021 to establish a database of beneficial ownership information for law enforcement purposes. The CTA is administered by FinCEN, a bureau within the US Department of Treasury whose mission is to safeguard the financial system from illicit use, combat money laundering, and promote national security.
Reporting companies include:
- C corporations
- S corporations
- Limited liability companies (LLCs)
- Single-member LLCs
- Certain types of partnerships
- Business trusts and
- Similar entities – both domestic and foreign – unless an exemption applies.
A company is required to report certain information for its beneficial owners – defined as those who
- Own at least 25% of the company (directly or indirectly), OR
- Exercise “substantial control” as defined.
Companies created on or after January 1, 2024, will also be required to provide information regarding company applicants – those who filed or directed the filing of documents that created or registered the entity with the secretary of state or similar office.
Willful failure to report the required information may result in civil penalties (up to $500/day for each day the violation continues) and criminal penalties (fines up to $10,000 and/or imprisonment for up to two years).
Deadlines
Companies existing before January 1, 2024, have until January 1, 2025, to file. New companies created in 2024 have 90 days to file their initial report. Filing will not be required annually; however, companies must update the report for any changes within 30 days.
More information can be found on FinCEN’s website, including a small entity compliance guide, FAQs, and other reference materials: https://www.fincen.gov/boi
If you are unsure whether this applies to you, contact an attorney for more guidance about your situation.
susan.kornatowski@hwco.cpa
