In the vast landscape of regulatory compliance, small businesses need to stay informed about the latest rules and requirements that can impact their operations. One such regulation that has garnered attention in recent times is the Beneficial Ownership Information Reporting Rule.
One of our goals at Paper Trails is to keep business owners like you informed of these latest challenges. In this article, we’ll break down the key aspects of the Beneficial Ownership Information Reporting Rule. We will shed light on what it entails for your business. By the time you are done reading, you should know your obligations and how you report this information.
What is the Beneficial Ownership Information Rule?
Beneficial ownership reporting is a new rule issued by the Financial Crimes Enforcement Network (FinCEN) requiring business owners to provide personal identifiable information about their beneficial owners – the individuals who ultimately reap the benefits of the company’s activities.
What is Beneficial Ownership Information?
Beneficial ownership information refers to the details of individuals who ultimately own or control a company. This includes individuals who hold at least 25% ownership interest in the company or have significant control over its management. These individuals are commonly known as “beneficial owners.”
The details that need to be reported about the company include:
- Its legal name;
- Any trade names, “doing business as”, or “trading as” names;
- The current street address of its principal place of business;
- Its jurisdiction of formation or registration; and
- Its Taxpayer Identification Number.
For each individual who is a beneficial owner or a company applicant, a company will have to report:
- The individual’s name, date of birth, and address;
- A unique identifying number from an acceptable identification document; and
- The name of the state or jurisdiction that issued the identification document.
Who is required to report this information?
Certain companies — referred to as “reporting companies” — will be required to report their beneficial ownership information to FinCEN. There are two types of reporting companies — domestic reporting companies and foreign reporting companies.
A domestic reporting company is defined as:
- a corporation,
- a limited liability company, or
- any other entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.
A foreign reporting company is any entity that is:
- a corporation, limited liability company, or other entity formed under the law of a foreign country, AND
- registered to do business in any U.S. state or in any Tribal jurisdiction, by the filing of a document with a secretary of state or any similar office under the law of a U.S. state or Indian tribe.
What are the Reporting Deadlines for Beneficial Ownership Information?
Companies must adhere to specific reporting timelines as outlined by the Beneficial Ownership Information Reporting Rule. A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial beneficial ownership information report. A reporting company created or registered on or after January 1, 2024, will have 30 days to file its initial beneficial ownership information report. Staying aware of these deadlines is essential to avoid potential penalties.
Fees for Submitting Information
At this time, there is no fee associated with submitting a beneficial ownership information report to FinCEN. However, it’s advisable to check with the relevant authorities for the most up-to-date fee structure, as regulations and requirements can evolve over time.
Significance of Reporting to the U.S Department of the Treasury
The requirement to report beneficial ownership information to the U.S Department of the Treasury serves as a crucial step in combating financial crimes, such as money laundering and terrorist financing. By maintaining a transparent record of individuals with substantial control over businesses, authorities can enhance their ability to track and prevent illicit activities.
For small businesses, understanding and complying with the Beneficial Ownership Information Reporting Rule is crucial. This allows businesses to not only to meet regulatory obligations but also to contribute to a safer and more transparent financial environment. By reporting accurate and timely beneficial ownership information, businesses play a vital role in the collective effort to combat financial crimes and uphold the integrity of the business landscape.
In navigating these requirements, seeking legal counsel and consulting with experts in the field can provide small business owners with the guidance they need to ensure compliance and continue focusing on the growth and success of their ventures. Please contact our team if you are looking for more information or need help navigating this challenge.