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Understanding Beneficial Ownership

 

New Rules for Business Owners:

Are You Ready?

Did you know that new regulations could affect your business’s reporting requirements?
Depending on when your company was registered, the reporting deadline may have been as
early as January 1, 2024. Don't let these changes catch you by surprise! Understanding
beneficial ownership is crucial to staying compliant and ensuring your business thrives in this
evolving landscape.

The Financial Crimes Enforcement Network (FinCEN) is rolling out the Beneficial Ownership
Information (BOI) Reporting Rule, a new requirement designed to increase transparency and
combat financial crimes. While it may sound daunting, we’re here to break it down into simple,
actionable steps so you can stay ahead of the curve.

 

What is Beneficial Ownership?

Beneficial ownership refers to the individuals who truly own or control a company, even if their
names aren’t on official paperwork. These individuals include:

  • Beneficial Owners: Anyone who owns at least 25% of a company or has substantial
    control over it.
  • Company Applicants: For businesses created on or after January 1, 2024, this
    includes:

    •  The person who files the document to create or register the company.
    • The person primarily responsible for directing the filing.

 

Who Needs to Report?

If your business is a small corporation or LLC, you’ll likely need to report beneficial ownership information to FinCEN. A simple rule of thumb: if you filed paperwork with your state’s secretary of state (or a similar office) to create your company, you are required to report.

However, some businesses are exempt, including:

  • Publicly traded companies.
  • Nonprofits.
  • Certain large operating companies.

For a complete list of exemptions, visit FinCEN’s website.

 

What Information Does My Business Need to Report?

Your report must include the following:

About Your Business:

  1. Legal name and trade name (if applicable).
  2. Address.
  3. Formation or registration jurisdiction.
  4. Taxpayer Identification Number (TIN).

About Each Beneficial Owner (and Company Applicant, if required):

  1. Legal name.
  2. Date of birth.
  3. Residential address.
  4. Identification details (e.g., driver’s license or passport number) and an image of the ID.

 

Why Does This Matter?

The new reporting requirements aim to:

  • Increase transparency in business ownership.
  • Combat financial crimes like fraud and money laundering.
  • Ensure sensitive information is securely stored in a non-public database managed by FinCEN.

By staying compliant, your business helps contribute to a safer, more transparent financial system.

 

How Does Reporting Benefit Me?

Reporting your business’s beneficial ownership helps establish trust and credibility with financial institutions and government entities. Here’s how it benefits you:

  1. Improved Transparency: By providing clear ownership information, you reduce the risk of fraud or misuse tied to your business’s name.
  2. Streamlined Processes: Reporting through FinCEN’s secure system makes it easier for your business to comply with federal regulations without excessive paperwork or fees.
  3. Compliance Made Simple: You’ll submit your information electronically through a secure platform launching January 1, 2024. This means no filing fees, no mailing hassle, and easy access to updates.

By staying compliant, your business is positioned as trustworthy and responsible – qualities that matter to potential partners, investors, and lenders.

 

When Should I Act, and Why Does It Matter?

Meeting the deadlines ensures your business avoids penalties and stays on the right side of the law. Here’s what you need to know:

  • If your business was created or registered before January 1, 2024:
    You have until January 1, 2025 to submit your initial report. 
  • If your business was created or registered on or after January 1, 2024:
    You’ll need to report within 30 days of receiving notice of your company’s creation or registration.

Acting promptly ensures you:

  • Avoid fines or delays that could disrupt your business operations.
  • Stay compliant while focusing on growing your business without regulatory worries.

The earlier you file, the sooner you can move forward confidently, knowing your business is meeting its obligations.

 

Stay Informed and Compliant

Understanding beneficial ownership doesn’t have to be overwhelming. By preparing now, you can ensure your business is compliant and ready for the new regulations.

For more information and resources, visit FinCEN’s Small Business Resources.

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