If you own a small business or are planning to start a business, you need to be aware of a new law that will require you to report information about your beneficial owners to the Financial Crimes Enforcement Network (FinCEN: fincen.gov) starting on January 1, 2024.
Why is the Government Starting to Gather This Information?
The government is starting to gather beneficial ownership information to help combat financial crimes such as money laundering, terrorist financing, and tax evasion. By knowing who ultimately owns and controls companies, the government can better identify and track suspicious transactions.
Who is a Beneficial Owner?
A beneficial owner is someone who ultimately owns or controls a company. This can be an individual, a group of individuals, or another legal entity. Beneficial owners may not always be the same as the people who are listed as directors or officers of a company. Here are some ways to tell if you are a beneficial owner of a company:
You have direct or indirect ownership of 25% or more of the company's shares or voting rights.
You have the right to exercise significant control over the company, even if you do not have majority ownership.
You benefit financially from the company's activities, even if you do not have any formal ownership or control rights.
If you are unsure whether or not you are a beneficial owner of a company, you should consult with an attorney.
Who Needs to File?
If you have filed your business (LLC) with your state secretary of state’s office you will need to file a BOI repost for your business. If you have multiple LLC’s (EIN’s) you will need to file a report for each one.
What Information Are They Looking For?
Full legal name
Date of birth
Residential address
Taxpayer identification number (TIN), such as a Social Security number or Individual Taxpayer Identification Number (ITIN)
A copy of a government-issued identification document, such as a driver's license or passport
What Are the Consequences of Not Reporting?
If you fail to report beneficial ownership information to FinCEN, you could face civil penalties of up to $500 per day. In addition, you could be criminally prosecuted and face up to five years in prison.
The Small Business Development Center (SBDC) is Here to Help
SBDC counselors can provide you with guidance on how to identify your beneficial owners, collect the required information, and submit your report to FinCEN.
The SBDC has created a reporting guide to help you through the process:
BEWARE OF FRAUDULENT REQUESTS
FinCEN has been notified of recent fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the Corporate Transparency Act. The fraudulent correspondence may be titled "Important Compliance Notice" and asks the recipient to click on a URL or to scan a QR code. Those e-mails or letters are fraudulent.
FinCEN does not send unsolicited requests. Please do not respond to these fraudulent messages, or click on any links or scan any QR codes within them. If you have any questions please reach out to your SBDC counselor for help.
The new beneficial ownership reporting requirements may seem daunting, but they are important for helping to combat financial crimes. The SBDC is here to help you comply with the new requirements and protect your business. For more information please visit our website or email jbaker@iwcc.edu. You can also visit the FinCEN Frequently Asked Questions (FAQ) Section on their website: https://www.fincen.gov/boi-faqs