7 Things You Should Know About the New Federal Reporting Requirement

By Gene Marks
The Hartford Small Biz Ahead
Originally Published: March 6, 2024 | Updated: April 8, 2024

If you own a business, get ready. There’s a new federal reporting requirement for business owners, and you don’t want to ignore it. If you do, the penalties are high.

Here are seven key things to know.

What is the new requirement?

Effective Jan. 1, more than 32 million business owners need to complete a special form called the Beneficial Ownership Information Report. You’ll need to file it with the Financial Crimes Enforcement Network (FinCEN), an arm of the U.S. Department of the Treasury.

The form is required as part of the 2021 Corporate Transparency Act. This act aims to reduce money laundering and the concealment of illicit funds by targeting shell companies and many other entities.

Who needs to file the Beneficial Ownership Information Report?

Entities including corporations, pass-throughs, partnerships, estate and benefit plans, and foreign companies registered to do business in any U.S. state or Indian tribe will have to share information about their beneficial owners. Sole proprietorships are not included.

Beneficial owners are generally shareholders who own at least 25% of an entity, which may include:

• Profit interests
• Options
• Warrants
• Other instruments like convertible notes

Besides shareholders, beneficial owners also include people that exercise substantial control over an entity. This means senior officers, including:

• President
• Chief financial officer
• General counsel
• Chief executive officer
• Chief operating officer

Any other officer who performs a similar function to those listed above may be required to file a report. This includes anyone with the authority to appoint or remove officers or a majority of directors of the reporting company. It could also include an important decision-maker for the reporting company, or any other individual with substantial control.

It’s important to note that there may be more than one beneficial owner of a company. Filings also need to be updated when a beneficial owner has a change of address or marital status or obtains a new driver’s license. There’s no fee to file this report…[MORE]

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To read the entire article by Gene Marks at The Hartford Small Biz Ahead website, visit: 7 Things You Should Know About the New Federal Reporting Requirement