New Federal Requirement for Beneficial Ownership Information

There is a new federal reporting requirement for beneficial ownership information starting January 1, 2024. Fines will come for various companies located in the United States if they do not start reporting the required information about their beneficial owners to the Financial Crimes Enforcement Network otherwise known as FinCEN.

What is a Beneficial Owner?

A beneficial owner is anyone who owns or has control over a company. FinCEN provides this as their technical definition:

• A beneficial owner is an individual who either directly or indirectly exercises substantial control over the reporting company, or
• Owns or controls at least 25% of the reporting company’s ownership interest

Does this Apply to My Company?

It more than likely will apply if your company falls under the following:

• A corporation, a limited liability company (LLC) or a company otherwise created in the United States by filing a document with the secretary of state or any similar office under law
• A foreign company registered to do business in the United States

When Do I Have to Report?

The timeline for companies to report is dependent on when the company was established. The guidelines are:

• Companies created prior to January 1, 2024 will have until January 1, 2025 to report beneficial ownership interests
• Companies established after January 1, 2024 will have 30 days upon receipt of their establishment to report your beneficial ownership interests
• Any changes made to a company’s beneficial ownership interests need to be reported within 30 days of the change

Are There Fines or Penalties to Not Reporting?

You might be thinking, “this is just busy work and I don’t have time for this” well that may be true, but the government does not care. The potential penalties associated to failing to comply with these new rules are:

• $500 per day fine
• Criminal penalties up to 2 years in prison and a fine of $10,000

What Information Do I Need to Report?

• The beneficial owner’s name
• The beneficial owner’s DOB
• The beneficial owner’s residential address
• An identifying number from an acceptable identification document such as a Driver’s License or Passport

Are There Any Exemptions?

There are some companies that are exempt from this filing requirement. For example, credit unions, banks, and insurance companies are all exempt.

In total there are 23 types of businesses that fall on the exempt list, see them here.

Companies whose business activities do not fall on the exempt list will be required to report the information stated above.

To learn more about the new requirement for beneficial ownership information, we highly recommend visiting FinCEN’s website.

Other questions? Contact Us!