NEW BURDEN FOR SMALL BUSINESS
CORPORATE TRANSPARENCY ACT; STARTING JANUARY 1, 2024
Starting January 1, 2024 a new mandatory ownership reporting will be required for small businesses (corporations, partnerships and LLC’s).
In 2021, Congress passed the Corporate Transparency Act on a bipartisan basis. This law creates a new beneficial ownership information (BOI) reporting requirement as part of the U.S. government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.
Under this law, small corporations and LLC’s will be required to provide to the Financial Crimes Enforcement Network (FinCEN) information on all “beneficial owners.”
A beneficial owner is any individual who owns or controls at least 25 percent of the ownership interests of a company OR individuals who directly or indirectly “exercise substantial control” even if they are not actual owners.
FinCEN has only published the broad outlines of this law. As of this writing, they are still working on the details. The information so far states:
Initial Reporting –
Starting January 1, 2024, FinCEN will begin accepting Beneficial Ownership Information (BOI) reports for businesses formed before 2024. All required businesses must have the reports turned in during the 2024 calendar year.
Businesses being started after 1/1/2024 will have only 30-days to submit BOI documentation.
Required information will include ownership percentage, full legal name, social security number, date of birth, current residential address, driver’s license number (or passport) and an image of the ID being used.
Changes for Reports –
In addition, if any of the above information changes through business ownership percentages, marriage, divorce, moving, or expiration of ID documents, then the new information has to be reported and updated ID images uploaded within 30 days of the changes!
Exclusions –
The only excluded restaurants would be ones with 20 or more full-time employees and more than $5 million in sales the prior year.
Inactive entities are also excluded.
There is a list on the Kallas and FinCEN websites with more information on exclusions.
Penalties-
Penalties for failing to comply with the filing requirements start at $500 per day and there may be criminal penalties for willful failure to comply.
Penalties may be imposed on the entity and any person who causes the failure.
This is not an annual report. After the initial report, only changes need to be made but they must be made very promptly to avoid outrageous penalties.
Again, FinCEN has only published the broad outlines of this law. As of this writing, they are still working on the details.
Kallas will keep you informed as more information is released.
