U.S. Beneficial Ownership Reporting Requirement: What Business Owners Need to Know
At the beginning of this year, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) launched a new requirement for businesses to file beneficial ownership information reports. This initiative stems from the bipartisan Corporate Transparency Act of 2021, designed to combat illicit financial activities by requiring many companies operating in the U.S. to disclose information about their ultimate owners or controllers. Business owners who don’t comply with the reporting requirement can face hefty fines and possible jail time, so it makes sense to get the counsel you need and plan to file your initial report by the deadline.
FinCEN describes a “beneficial owner” as an individual who owns or controls at least 25% of a company or has substantial control over the company. A “company applicant” is someone who directly files, or is primarily responsible for filing, documents that create or register the company.
Reporting companies must adhere to specific filing deadlines:
Existing Companies: Entities created or registered in the United States before January 1, 2024, are required to file their initial reports by January 1, 2025.
Newly Created or Registered Companies: Entities formed or registered in the United States in 2024 have 90 calendar days after receiving notice of their company’s effective creation or registration to file.
If you are a beneficial owner, you can file your report at this link. Each reporting company must provide four key pieces of information about each beneficial owner:
Name
Date of birth
Address
Identifying number and issuer from an acceptable document (e.g., U.S. driver’s license, U.S. passport, state-issued identification)
In addition, reporting companies must furnish certain details about themselves, such as their names and addresses. Companies created on or after January 1, 2024, must also disclose information about the individuals who formed the company (“company applicants”).
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Some companies are exempt from the reporting requirement. FinCEN has identified 23 types of businesses, including publicly traded companies that meet certain requirements, many nonprofits, and certain large operating companies. You can find a list of these entities here.
If this all sounds complicated, take comfort in knowing that reporting is not an annual requirement; beneficial owners only need to submit their information once unless they need to make updates or corrections.
Failure to comply with reporting requirements can lead to severe penalties, including civil or criminal consequences. Civil penalties may reach up to $500 per day for each ongoing violation, while criminal penalties can result in imprisonment for up to two years and/or fines of up to $10,000. Senior officers of non-compliant entities may also be held accountable for such failures.
Business owners should seek legal counsel for questions or concerns regarding their reporting obligations. Visit FinCEN’s BOI website for comprehensive information and resources to ensure you are compliant with the beneficial ownership reporting requirement.
Wayne B. Titus
Financial Advisor / Managing Director