Beginning 1/1/2024, most small businesses will be required to report information about the business entity, its beneficial owners and the company applicants who established the entity. Substantial fines and penalties apply if timely reports are not filed. Reports and enforcement have been assigned to the Financial Crimes Enforcement Network of the Treasury Department (FinCEN). The purpose of the new reports is to better combat money laundering and other financial crimes and terrorism.
Reporting companies include corporations, LLCs, LLPs, PLLCs, and other entities formed by filing or registering with a state or local government. Registered foreign entities must also report. Larger business entities with an address in the United States and at least twenty full-time employees are exempt, as are banks, brokers, and similar entities registered with the SEC. Tax exempt entities are also exempt.
A beneficial owner is an individual who either owns or controls at least 25% of the ownership interests of the entity or exercises substantial control over the entity. Entity officers are also included as beneficial owners. Company applicants are the individuals who form the entity with the state or local agency. Reporting information includes name, birthdate, address, ID number, along with an image of the document (ex. driver’s license, passport).
For new entities formed on or after 1/1/2024, reporting is due within 30 days (recently extended to 90 days for entities created in 2024). For entities formed prior to 1/1/2024, reporting is due by 1/1/2025. Any changes or corrections must be promptly reported within 30 days. These rules are extensive and cast a wide net. Final forms have not been issued. For more information, see the small entity compliance guide.
The required information is extensive, intensive and may be difficult to determine in complex business structures and family trusts. It is estimated that more than 32 million businesses will need to comply. The attorneys at Capell Barnett Matalon & Schoenfeld LLP are available to assist you in meeting these new requirements. As each company is different, a written engagement agreement will be required before we are able to provide guidance.