New Ownership Reporting Rules Probably Apply to Your Small-Business Clients
For each beneficial owner, the company must disclose full legal name, date of birth, address, identifying number from the individual’s ID (driver’s license or passport) and a copy of the ID used.
For each company applicant, the following information is required: the individual’s name, date of birth, address and information from the individual’s ID, including the document number and jurisdiction.
Entities created before Jan. 1 must file their report before Jan. 1, 2025. Entities registered after Jan. 1 have 90 days from the date their registration becomes effective to report the required information. The registration portal opened Jan. 1 and is available at https://boiefiling.fincen.gov/.
That said, these are not annual reporting requirements. Companies must update their filings only if there are any changes with respect to the information that has already been filed. They must also update reports to fix any inaccuracies within 30 days of learning of the error.
Exemptions to the Requirements
Most small-business clients will not qualify under the exemptions that FinCEN has created. The law does create exemptions for tax-exempt entities, certain political organizations and inactive organizations that are no longer conducting business.
Other exempt entities include banks, credit unions, money services businesses, securities brokers, securities exchanges, accounting firms, pooled investment vehicles, public utilities, financial market utilities, state-licensed insurance producers, venture capital fund advisors and Exchange Act-registered entities. Subsidiaries of certain exempt entities may also be exempt.
Broadly speaking, most entities that are exempt are classified as such only because they’re already subject to regulatory reporting obligations under a separate regime.
Conclusion
Most business entities will be classified as reporting companies under the FinCEN reporting structure if they filed any formal paperwork with a state to create the entities. Sole proprietors are not subject to the reporting rules. However, advisors should check to see whether a business client qualifies for an exemption sooner rather than later.
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