Happy Wednesday!
Starting January 1 of this year, many companies (including small businesses) are required to file a FinCEN Beneficial Ownership Information (FinCEN BOI) report about the individuals who own or control the business entity, or face daily fines. Today we're explaining where this came from, why it matters to small business owners, and the important dates you should keep in mind.
The Corporate Transparency Act (CTA):
CTA was enacted in 2021 to combat money laundering, financing terrorism, and other illicit activities. It requires businesses to disclose the identities of who owns them to FinCEN.
Key Implications for Small Businesses:
Reporting Requirements: Small businesses are now required to provide information about the individuals who own or control their companies (beneficial owners). This includes providing names, birthdates, addresses, and identification numbers (like a driver's license or passport number).
Compliance and Penalties: Non-compliance can result in penalties. It's vital to understand and adhere to these new reporting requirements to avoid potential legal and financial repercussions.
Privacy and Security: While the CTA increases transparency, it also ensures the protection of personal information. Access to the beneficial ownership information is limited to authorized government bodies and, in certain cases, financial institutions conducting due diligence.
What is FinCEN?
FinCEN is short for Financial Crimes Enforcement Network (FinCEN), which is part of the United States Department of the Treasury. As a regulatory authority, FinCEN collects and analyzes information about financial transactions in order to combat domestic and international money laundering, terrorist financing, other financial crimes, and promote national security.
What This Means for Your Business:
Understand Your Obligations: Corporations, limited liability companies (LLCs), limited liability partnerships (LLPs), limited liability limited partnerships (LLLPs), limited partnerships (LPs), non-profit corporations, business trusts, and any other entity created by filing a document with the Secretary of State or a Native American tribe are required to file the FinCEN report.
Understand The Deadlines:
If the business was created or registered before January 1, 2024, they have until January 1, 2025 to file their initial BOI reports.
If the company is created or registered during 2024, they have 90 calendar days from the date of receiving actual or public notice of their creation or registration becoming effective to file their initial reports.
For companies created or registered on or after January 1, 2025, they have 30 calendar days to file their initial BOI reports.
Understand the Penalties: The penalties for not filing the FinCEN BOI report by the deadline are pretty steep. A daily fine of up to $500 for each day not filed, an additional fine up to $10,000 and/or up to 2 years of jail time.
Keep Up-To-Date: Regulations tend to change regularly. The Real ID requirements for air travel was delayed repeatedly. While we don't expect this to be delayed in the same way, it's important you and your financial professionals stay up-to-date on the latest requirements.
Ask for Help: The day-to-day life of business owners is already packed, so ask for professional help if you don't have the bandwidth to file yourself. The cost of daily penalties likely outweighs the cost of professional assistance.
Additional information can be found at: https://www.fincen.gov/boi-faqs
As always, please reach out with any questions or if you’d like to discuss. If there are topics you'd like to learn more about, shoot me an email.
Sincerely,
Garrett
P.S. Ready for a better experience? Consider full-service financial planning.
Comments