New filing requirement impacting millions of businesses

February 7, 2024

A new business filing requirement went into effect on January 1, 2024.

More than 30 million small businesses now are required to report their beneficial owners (i.e., persons who have substantial control or own at least a 25% ownership interest) to the Financial Crimes Enforcement Network. 

Applicability 

An entity must file a report if it is a corporation or a limited liability company (LLC), or if it was otherwise created in the U.S. by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe. Additionally, foreign companies registered to do business in any U.S. state or Indian tribe must file. 

There are 23 categories of entities that are exempt. They include, for example, publicly traded companies meeting specified requirements and many nonprofits. (The full list of exemptions is included in this document).

Most notably, the “Large Operating Company” exemption is met if a company has ALL of the following: 

  • More than 20 full-time employees in the U.S.
  • Operating presence at a physical office within the U.S. 
  • More than $5 million in gross revenue or sales from sources inside the U.S. on the prior year’s federal income tax return

Deadlines

The deadlines to report beneficial ownership are dependent on when the entity was created. 

  • If a business was in existence on January 1, 2024, beneficial ownership information must be filed by January 1, 2025.
  • If a business is created after January 1, 2024, but before January 1, 2025, beneficial ownership information must be filed within 90 days.
  • If a business is created on or after January 1, 2025, beneficial information must be filed within 30 days. 

Note: In addition to its initial required filing, companies have 30 days after any change to previously filed information to report the change, such as beneficial owner changes, legal name or physical address changes, expiration dates, etc.

Additional information

Additional information about the rule, a detailed list of exempt entities and guidance materials are available at www.fincen.gov/boi.

Recommended steps

With civil penalties for noncompliance of up to $500 per day, we recommend that you:

  1. Review your entities individually to determine if any of them qualify for one of the 23 exemptions.
  2. Gather relevant information of beneficial owners for any entities that do not qualify for exemptions.
  3. Ensure timely filing of the required information.

If you have questions about this new requirement, contact Honkamp.  

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