Navigating the New Beneficial Ownership Reporting Requirements: What Businesses Need to Know
The start of 2024 marks a significant shift for businesses operating in the United States, with the implementation of new reporting requirements under the Federal Corporate Transparency Act. This act introduces the Reporting Rule, which necessitates certain businesses to file Beneficial Ownership Information (BOI) reports with the Financial Crimes Enforcement Network (FinCEN). Here’s what you need to understand about these new requirements:
Who Needs to File BOI Reports?
- Reporting Companies Defined: A reporting company is either a ‘domestic reporting company’ (formed or registered in the U.S.) or a ‘foreign reporting company’ (formed outside but registered to do business in the U.S.).
- Exemptions: If your company doesn’t meet the definitions of a reporting company or qualifies for an exemption, it’s not required to file a BOI report.
What Information is Required in the Reports?
- Categories of Individuals: The BOI reports must include details about two key groups:
- Beneficial Owners: Individuals who either exercise substantial control over the company or own/control at least 25% of the company’s interests.
- Company Applicants: These include the person who filed the formation or registration documents and the individual responsible for directing or controlling this filing action.
Penalties for Non-Compliance
- Failure to report, incomplete reporting, or providing false information can lead to civil penalties of up to $500 per day or criminal penalties, including imprisonment and fines.
Identifying Beneficial Owners and Company Applicants
- Beneficial Owners: Look for individuals with substantial control or owning significant interests in the company. There’s no need to report the reason for their beneficial ownership status.
- Company Applicants: Reporting is required for entities formed or registered to do business in the U.S. beginning January 1, 2024.
Filing Deadlines
- Existing Companies: If your company existed before January 1, 2024, the initial BOI report must be filed by January 1, 2025.
- New Companies: Companies created or registered from January 1, 2024, onwards have specific deadlines based on when they receive notice of their formation or registration.
The Process of Reporting
- FinCEN will accept BOI reports electronically through its secure filing system starting January 1, 2024.
- The process involves identifying individuals with substantial control, determining the types of ownership interests, and calculating the percentage of ownership interests held by these individuals.
This new Reporting Rule is a step toward greater transparency in business operations. Companies must understand these requirements and ensure compliance to avoid hefty penalties. Curly Girl Law is always here to guide you through these changes and assist you in navigating these new legal waters. Schedule a consultation to discuss your specific needs.
Stay informed and compliant, and let’s make 2024 a year of growth and transparency in business!