It’s a new year, and that means a new set of rules and regulations for businesses. One of the most important changes is the new requirement to report beneficial ownership information.
In January 2021, the Corporate Transparency Act (CTA) was enacted as part of the National Defense Authorization Act for Fiscal Year 2021. The CTA requires certain entities to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).
Beneficial ownership information is information that identifies the natural persons who ultimately own or control a legal entity. This information can be used by law enforcement, national security agencies, and other authorized government authorities to identify and investigate individuals who may be involved in money laundering, terrorist financing, and other financial crimes.
The new reporting requirement applies to a wide range of entities, including corporations, limited liability companies and limited partnerships.. It does not apply to sole proprietorships, partnerships that are not required to be registered with the Securities and Exchange Commission (SEC), non-profit organizations, governmental entities, religious organizations, educational institutions, and charitable organizations. Individuals who own or control more than 25% of an entity must also report their beneficial ownership information.
The information that must be reported includes the beneficial owner’s name, date of birth, address, citizenship, title, and ownership percentage. The information must be reported to the Financial Crimes Enforcement Network (FinCEN) within 14 days of the date on which the entity is created or registered.
The beneficial ownership information reporting requirements are phased in as follows:
• Reporting companies created or registered before January 1, 2024, have one year (until January 1, 2025) to file their initial reports.
• Reporting companies created or registered on or after January 1, 2024, have 30 days to file their initial reports.
• Reporting companies must file updates to their beneficial ownership information reports within 30 days of any change in their beneficial ownership information.
There are a few exemptions to the reporting requirement. Entities that have less than $5 million in gross receipts or total assets on the last day of their most recent fiscal year are exempt. Entities that are not organized for a business purpose are also exempt. Finally, entities that are owned by other entities that are already required to report beneficial ownership information are exempt.
The new reporting requirement is a significant development in the fight against financial crime. By requiring entities to report information about their beneficial owners, law enforcement and other authorities will be able to more easily identify and investigate individuals who may be involved in illicit activity.
The reporting requirement is mandatory and ongoing. If you fail to report beneficial ownership information, you could be subject to civil penalties of up to $500 per day.
The new beneficial ownership reporting requirements are like a financial colonoscopy. It’s not fun, but it’s necessary to keep our financial system healthy. In order to stay healthy, it is important to:
• Start planning early. The beneficial ownership information reporting requirements are a new obligation for many businesses. It is important to start planning early to ensure that the business is able to comply with the requirements.
• Get help from an expert. If the business is not familiar with the beneficial ownership information reporting requirements, it may be helpful to get help from an expert, such as an attorney or accountant.
• Stay up-to-date. The beneficial ownership information reporting requirements are complex and may change over time. It is important to stay up-to-date on the latest requirements by visiting FinCEN’s website.
The beneficial ownership information reporting requirements are a significant new development in the fight against financial crime. These requirements will help law enforcement, national security agencies, and other authorized government authorities to identify and investigate individuals who may be involved in money laundering, terrorist financing, and other financial crimes. The information will also be made available to financial institutions and other regulated entities, which will help them to comply with their own anti-money laundering and customer due diligence requirements. Businesses should take steps to comply with these requirements as soon as possible.
If you have any questions about the new law or its impact on your specific situation, please do not hesitate to contact us.
