Reporting Deadline: January 1, 2025
Many business entities are facing a new information reporting requirement as to who ultimately owns and controls the entity (“Beneficial Owners”). This information will need to be reported to the U.S. Government no later than January 1, 2025.
Albin, Randall & Bennett is not qualified to advise you about, or to prepare or submit, Beneficial Ownership Information Reports. This new requirement is not a part of the Internal Revenue Code. Providing services related to this matter constitutes the practice of law. We strongly recommend you engage qualified legal counsel to assist with these matters.
The following general information is provided to raise awareness. Compliance with these new rules can be complex – the Small Entity Compliance Guide issued by the U.S. Government is 57 pages in length. A link to the Guide is provided at the end of this article. Questions about these matters must be addressed to legal counsel.
What entities must comply with the new Beneficial Ownership reporting requirement?
Entities organized both inside and outside the U.S. may be subject to the reporting requirements. Domestic companies required to report include corporations, limited liability companies (LLCs) or any similar entity created by the filing of a document with a Secretary of State or any similar office under the law of a State or Tribal jurisdiction.
Domestic entities that are not created by the filing of a document with a Secretary of State or similar office are not subject to the reporting requirements.
Foreign companies required to report include corporations, LLCs or any similar entity that is formed under the law of a foreign country and registered to do business in any State or Tribal jurisdiction by filing a document with a Secretary of State or any similar office.
Are there exemptions from the reporting requirements?
23 categories of exemptions are provided, to include publicly traded companies, banks & credit unions, securities brokers/dealers, and tax-exempt entities. Exemptions generally apply to entities already heavily regulated by the U.S. Government.
An exemption is also provided for a “large operating entity,” which is an entity that (a) employs more than 20 full-time employees in the U.S., (b) reports gross revenue in excess of $5 million on the prior year tax return, and (c) is physically present in the U.S.
Who is a beneficial owner?
Any individual who, directly or indirectly, either (a) exercises “substantial control” over a reporting company, or (b) owns or controls at least 25% of the ownership interests of a reporting company.
An individual has substantial control of a reporting company if they direct, determine or exercise substantial influence over important decisions of the reporting company. This includes any senior officers of the reporting company, regardless of formal title or if they have any ownership interest in the reporting company.
When must companies file?
There are different filing time frames depending on when an entity is registered/formed or if there is a change to a Beneficial Owner’s information.
- New entities (created/registered in 2024) — must file within 90 days
- New entities (created/registered after 12/31/2024) — must file within 30 days
- Existing entities (created/registered before 1/1/24) — must file by 1/1/25
- Reporting companies with changes to previously reported information or discover inaccuracies in previously filed reports — must file within 30 days
What sort of information is required to be reported?
Companies must report the following information: full name of the reporting company, any trade name or doing business as (DBA) name, business address, State or Tribal jurisdiction of formation, and an IRS taxpayer identification number (TIN).
Required information about the entity’s Beneficial Owners includes — name, birthdate, address, unique identifying number and issuing jurisdiction from an acceptable identification document (such as a driver’s license or passport), and an image of the document.
Is there a requirement to annually report Beneficial Ownership Information?
No. There is no annual reporting requirement. Reporting companies must file an initial Beneficial Ownership Information report and will file updated or corrected reports as needed.
What are the penalties for failure to comply?
Penalties for willfully not complying with these new reporting requirements can result in criminal and civil penalties of $500 per day and up to $10,000 with up to two years of jail time.
Resources For More Information:
The Financial Crimes Enforcement Network website: https://www.fincen.gov/boi
FINCEN Small Entity Compliance Guide: Click on the website link above, then click on “Small Business Resources.” Finally, click on “Small Entity Compliance Guide.” Because the FINCEN website layout is subject to change, you may need to utilize the website’s search box with the search term “Small Entity Compliance Guide” to locate the document.
Dan Doiron has been in public accounting since his college internship with ARB in 1986. He has been a Principal since 1996 and works extensively with all types of clients to solve their compliance and tax planning issues. Dan was the May 1987 State of Maine Gold Medalist for earning the highest scores on all four parts of the CPA Examination. He is the Practice Leader of both ARB’s Business Tax Services Team and ARB’s Private Client Advisory Services Team.
