If you own a business, own part of a business, or have some ownership in a legal entity (including LLCs), this blog is for you because you may have new filing requirements to complete by the end of year 2024!

Understanding the New FinCEN Beneficial Ownership Filing Requirements for Corporate Entities

As we move deeper into 2024, corporate entities face new compliance requirements, specifically surrounding the FinCEN (Financial Crimes Enforcement Network) system. These changes are part of an ongoing effort to enhance transparency and prevent money laundering, tax evasion, and other financial crimes. If you’re a business owner or involved in managing corporate filings, it’s essential to understand these new obligations related to beneficial ownership reporting.

What Is Beneficial Ownership?

A beneficial owner is any individual who directly or indirectly owns or controls a significant portion of a company. Generally, this refers to individuals who own 25% or more of the company or who exercise substantial control over the business. However, the rules may vary slightly depending on the nature of the entity and jurisdiction.

New FinCEN Reporting Requirements

The new FinCEN requirements are rooted in the Corporate Transparency Act (CTA), which was enacted to help combat illicit financial activity. The CTA mandates that most corporations, LLCs, and other similar entities report beneficial ownership information to FinCEN.

Starting in January 2024, the requirement for entities to file Beneficial Ownership Information (BOI) reports will become mandatory. These filings must include detailed information on the individuals who fall under the definition of beneficial owners. For each beneficial owner, the report must include:

• Full legal name
• Date of birth
• Current residential or business address
• A unique identifying number from a legal document (e.g., a passport or driver's license)

Entities will be required to update FinCEN with any changes to this information, ensuring that the agency has up-to-date details on the ownership and control of the entity.

Who Must Comply?

The filing requirements apply to domestic and foreign entities registered to do business in the United States, with a few exceptions. Most small and medium-sized corporations and LLCs will need to comply, but there are some exemptions, including:

• Publicly traded companies
• Banks and credit unions
• Insurance companies
• Large operating companies (those with more than 20 full-time employees and more than $5 million in revenue)

Why This Matters

These new reporting obligations aim to increase transparency and reduce the ability of criminals to hide behind anonymous shell companies. While the intentions of this law are good, the reality is it does add more work and added compliance complexity to small and mid-size businesses. Failure to file, late filing, or submitting incorrect information can result in substantial penalties, including fines of up to $500 per day and criminal charges for willful violations.

This may seem overwhelming at first, but if you are proactive, complying with these new regulations should not be as difficult as it first appears. Working with a financial planner or legal advisor can help ensure the process goes smoothly and that all necessary filings are completed on time.

What You Should Do Next

If you are responsible for a corporate entity, it’s crucial to:

1. Identify Beneficial Owners: Ensure you have up-to-date records on the individuals who qualify as beneficial owners under the new FinCEN requirements.
2. Gather Necessary Documentation: Ensure that you have the required legal identification and contact information for each beneficial owner.
3. Plan for Annual Filings: Remember, this is not a one-time task. You'll need to update FinCEN whenever there are changes in beneficial ownership.
4. Consult a Professional: Compliance can be complex. Engaging a financial planner or legal professional will help you navigate these new rules and avoid costly mistakes. If you don’t feel this is something you or your business can handle yourselves, contact us and we will either help you directly or connect you with a more appropriate advisor.

Want more information or ready to start?

You can get started or read more information directly from the source at https://www.fincen.gov/boi. They have a great video explaining the situation as well as how to apply. There are FAQs and lots of information. However, if you decide you need help, reach out to us.