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Beneficial Ownership Reporting:
What you should know.

Notice:
As of December 3rd, a judge has blocked the filing requirement nationwide. This is currently a temporary injunction, but I am hoping this requirement will be gone completely in the coming months.

In 2020, a federal law was passed that expanded the role of the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) to collect and store confidential personal information about small businesses with 20 or fewer full-time employees, and less than 5 Million in Gross Receipts for the prior year.

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Companies formed before January 1, 2024 have until January 1, 2025 to report beneficial owner data, a beneficial owner is any individual who, directly or indirectly, exercises substantial control over a reporting company or who owns or controls at least 25 percent of a reporting company.

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As the law stands right now to avoid penalties of up to $10,000:

 

  • If you form a company or LLC in 2024 with fewer than 20 employees, you have 90 days to complete this reporting.

  • Company is defined as any entity that has been registered with the IRS or your Secretary of State. This includes: if you have applied for a tax ID number, if you are a single member of an LLC and still filing taxes as a sole proprietor, or if you have filed for an S-Corp status regardless if you are an LLC.

  • If you have an existing company that was formed prior to January 1st, you have until January 1, 2025 to complete this.

  • Anyone who has a 25% or greater stake in the company or senior officer will have to register a copy of their driver’s license and business information.

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Disclaimer: This is not to be construed as legal advice, the information on this page is intended as a starting point for understanding the new requirements.

  • Who can complete this reporting?
    Any owner or individual can complete this filing. I am seeing local law offices offering this as part of their services, and I am also seeing independent companies offering this service. As with anything, know who you are dealing with before engaging with a new company. I believe we will be seeing an increase in identity theft issues from unreputable companies. There are serious legal repercussions for reporting incorrectly. Because of that, insurance companies are warning bookkeepers and other professionals who might engage in this reporting to not offer this service. I will only be offering this service to existing customers that are single-member LLCs. I recommend that partnerships seek legal counsel or have someone intimate with the partnership arrangement and operating agreement complete the report.
  • Will I need to do any ongoing reporting?
    The short answer is yes. The way I am interpreting the regulations is that if a beneficial owner makes any changes to their personal address or reported information, it will need to be updated immediately. Also, any changes to your ownership structure will need to be reported. What is not clear is if they will require any periodic reporting in the future. The following guidelines are within their Small Entity Compliance Guide, December 2023 - Version 1.1 45. 6.1 What should I do if previously reported information changes? If there is any change to the required information about your company or its beneficial owners in a BOI report that your company filed, your company must file an updated BOI report no later than 30 days after the date on which the change occurred. The same 30-day timeline applies to changes in information submitted by an individual in order to obtain a FinCEN identifier. A reporting company is not required to file an updated report for any changes to previously reported personal information about a company applicant. The following are some examples of changes that would require an updated BOI report: • Any change to the information reported for the reporting company, such as registering a new DBA. • A change in beneficial owners, such as a new Chief Executive Officer, a sale that changes who meets the ownership interest threshold of 25 percent, or the death of a beneficial owner. Note: When a beneficial owner dies, resulting in changes to the reporting company’s beneficial owners, report those changes within 30 days of when the deceased beneficial owner’s estate is settled. The updated report should, to the extent appropriate, identify any new beneficial owners. • Any change to a beneficial owner’s name, address, or unique identifying number provided in a BOI report. Note: If a beneficial owner obtained a new driver’s license or other identifying document that includes the changed name, address, or identifying number, the reporting company also would have to file an updated beneficial ownership information report with FinCEN, including an image of the new identifying document.
  • How would I know if my business or organization is exempt?
    Refer directly to the Fincen Compliance guide, I have provided a link below.
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