In 2021, Congress passed the Corporate Transparency Act, developing a new beneficial ownership information reporting requirement effective January 1, 2024. This new law is designed to create transparency around business ownership in an effort to prevent bad actors from committing illegal activities – like money laundering, tax fraud, etc. – behind shell companies or other obscure business structures.
Simply put, it means that companies must report who owns them, either directly or indirectly. And, it only takes a moment to complete.
What Kind of Information Has to be Reported?
The form requires simple information that you would be used to including on tax preparation documents, like the company name, address and Employer Identification Number (EIN as well as the company owner’s legal name Social Security Number (SSN) and contact information.
This information is collected by the United States Treasury’s Financial Crimes Enforcement Network, known as FinCEN.
What is a Beneficial Owner?
A beneficial owner either exercises substantial control over a company or owns, either directly or indirectly, at least 25 percent of it.
Do All Companies Have to Complete the Reporting?
While most small business owners will have to file, there are exemptions from the Corporate Transparency Act. FinCEN has outlined the exemptions here.
Who Can Access this Company Data?
Beneficial ownership information reported to FinCEN will be stored in a secure, non-public database using rigorous information security methods and controls.
Certain Federal, State, local, Tribal and foreign officials will be able to request beneficial ownership information for authorized activities related to national security, intelligence and law enforcement. Financial institutions will have access to beneficial ownership information in certain circumstances, with the consent of the reporting company.
How Long Do I Have to File?
If your business was established prior to January 1, 2024, you will have until January 1, 2025 to complete the beneficial ownership information reporting. Businesses established on January 1, 2024 or after must file within 90 days of inception. Those established on or after January 1, 2025 have 30 days to report.
How Do I Complete the Report?
The report is easily completed through FinCEN’s e-filing website and should only take a few minutes to complete. There is no fee to file, nor is there an annual reporting requirement.
Additional reports must only be filed if there is a material change in beneficial owner information. The following are examples as to when an additional report must be filed:
- A change in ownership of the company.
- A change in address of one (or more) of the owners.
- An inaccuracy is discovered in the initial report.
What If I Need to Change It?
If a report was filed incorrectly, a corrected report must be filed within 30 days. This is easily done through the same e-filing website.
What is the Penalty for Not Filing?
Hefty civil and criminal penalties can be imposed on companies that fail to file a complete report, so take a few moments to complete your report today!
Key Terms to Know:
- Reporting Company: The entity – such as your small business – that is required to file a Beneficial Ownership Information report.
- Beneficial Owner: An individual substantially controlling a company, owning or controlling 25 percent or more of the ownership interests of a company, or both.
- Company Applicant: The person completing the report.