New Federal “Beneficial Ownership” reporting requirement

The United States Department of the Treasury has enacted new reporting requirements for both new and existing business entities. Effective January 1, 2024, most corporations, limited liability companies (LLC), and similar entities are required to provide information about the company, its beneficial owners, and company applicants to the Financial Crimes Enforcement Network (FinCEN). This new requirement aims to combat financial crimes, including money laundering and terrorism financing through shell companies.

 

Businesses that are required to report beneficial ownership information (BOI), but fail to do so may incur penalties, therefore, it is important for businesses to understand and adhere to the requirements.  Companies must report information about their beneficial owners, defined as individuals who directly or indirectly exercise substantial control or own at least 25% of the ownership interests. Substantial control includes senior officers and key decision-makers who influence the company's finances, operations, or structure.

 

Only businesses that were created by filing with their state’s Secretary of State are required to register. That includes LLC’s and corporations, but not those who have only filed a Fictitious Name. Some types of businesses are exempt, such as sole proprietorships, banks, accounting firms, government entities, insurance companies, and very large businesses. Companies created before 2024 have until December 31, 2024 to file.  Business entities filed in 2024 have 90 days from creation. Businesses created after 2024 will have 30 days to file their registration. Failure to properly register can result in fines, penalties, and even criminal charges.

 

The U.S. Treasury Department is implementing this rule as part of efforts to make it harder for "bad actors" to hide their ill-gotten gains through opaque ownership structures. Additional information and guidance is available at www.fincen.gov/boi, where businesses will also submit their beneficial ownership information.

 

The Ozarks Small Business Incubator (OzSBI) is available to assist anyone with questions or who needs help completing the beneficial ownership registration process.  Business owners can schedule a meeting with OzSBI Business Mentor Gene Weinbeck by going to calendly.com/geneweinbeck-ozsbi/one-on-one-mentoring or calling 417-256-9724.