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New 2024 Federal Entity Filing Requirement: Beneficial Ownership Reporting


What is Beneficial Ownership Reporting?


You are required to file identifying information about the individuals who directly or indirectly own or control your company with the Financial Crimes Enforcement Network in order to satisfy requirements under the Corporate Transparency Act. The Beneficial Ownership Information Reporting Rule went into effect Jan. 1, 2024, so it's important to understand this new law given the severity of criminal and civil penalties for failure to file, which include imprisonment and fines.


What are the penalties for not filing?


Each business is responsible for filing a Beneficial Ownership Information Report which includes all of the individuals who control or own the business. However, a beneficial owner of a business who willfully fails to follow the reporting requirement and filing rules, or who misleads the Financial Crimes Enforcement Network, will face personal liability in the form of both criminal and civil penalties for noncompliance with the Corporate Transparency Act. Failure to comply can lead to criminal penalties of imprisonment for up to two years and/or a fine of up to $10,000, and a civil penalty of $500 per day. Even if a reporting company files the report on time, penalties can be imposed if the report does not include the correct information. It is critical that the reporting company’s filing is accurate.


When is the Beneficial Ownership Information Report due?


The Beneficial Ownership Information Reporting Rule went into effect Jan. 1, 2024, and it's important to understand this new law given the the requirements. The deadline varies depending on your date of formation, which we can help you determine, and we can help you stay on top of the process with notifications leading up to your filing deadline. Generally, business entities formed before Jan. 1, 2024 will have until Dec. 31, 2024 to file.


Business entities formed on or after Jan. 1, 2024 will have 90 days after formation to file. Business entities that amend their formation documents on or after Jan. 1, 2024 will have 30 days to submit a new report. Taking care of this requirement will help you avoid criminal and civil penalties for failing to comply, including imprisonment for up to two years, a fine of up to $10,000, and/or a fine of $500 per day.


Who is a beneficial owner?


A beneficial owner under the Corporate Transparency Act is an individual who directly or indirectly: (1) owns or controls at least 25% of your company’s ownership interests, or (2) exercises substantial control over your business. Common examples of someone that exercises substantial control can include the following:

  • An important decision-maker for the reporting company

  • A senior officer (president, chief executive officer, chief financial officer, general counsel, chief operating officer, or any other officer with a similar function)

  • An individual with the authority to appoint or remove certain officers or a majority of directors (or similar body) of the company


What is in the Beneficial Ownership Information Report?


The Beneficial Ownership Information Report includes several pieces of information about the reporting company, such as:

  • its full legal name, any trade or DBA names,

  • its address,

  • federal tax ID number (or EIN), and

  • the jurisdiction where it was created.


The report also includes the owners’:

  • full legal names,

  • birth dates, current addresses,

  • images of acceptable identification documents (such as a passports or driver's licenses), along with the issuing jurisdiction and the document's ID number.

If the person who filed your entity formation documents (known as the applicant) is not one of the beneficial owners, the applicant must also provide the same information as the beneficial owners. Using our service simplifies the process for reporting and filing the required information with the Financial Crimes Enforcement Network, saving you time and stress related to deadlines and accurate filing of your report.


How are LLCs impacted by the beneficial ownership information reporting rule?


Owners of a limited liability company (LLC) need to file the new report with the federal agency and provide basic contact information about the company and its owners (known as members). This requirement applies to single-member and multi-member LLCs.


Who is exempt from beneficial ownership information reporting?


Most small business entities are not exempt from this requirement. Entities that are exempt from beneficial ownership information reporting include publicly traded companies, tax-exempt nonprofit organizations, certain large operating companies, and others that meet specific requirements. The Financial Crimes Enforcement Network lists 23 types of exempt entities that do not qualify as reporting companies and certain individuals that can’t be listed as a beneficial owner under the reporting requirement.

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