A new law coming into effect at the beginning of 2024 will affect numerous small business owners.
According to the U.S. Chamber of Commerce, the Corporate Transparency Act (ACT) will go into effect on Jan. 1, 2024. The law is intended to take action against money laundering, tax fraud, and financing for terrorism by retrieving more information around the ownership of a business.
For some companies, what will be required will be the completion of a Beneficial Ownership Information (BOI) report, which must be submitted to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). The report will need information pertaining to “any individual who, directly or indirectly exercises ‘substantial control’ over a reporting company or owns or controls at least 25 percent of the ‘ownership interests’ of a reporting company,” according to a compliance document released by FinCEN.
Those that must complete the report will be domestic reporting companies (corporations, limited liability companies, and entities created with a secretary of state or other office in the United States) and foreign reporting companies. There are 23 types of entities that will not need to submit the report, per FinCEN.
In addition, individuals who created their business before Jan. 1, 2024, will have until Jan. 1, 2025, to file the initial report.
Companies created on or after Jan. 1, 2024, will have to complete their information sooner.
“A reporting company created or registered on or after January 1, 2024, will have 30 days to file its initial beneficial ownership information report,” the FinCEN document reads. “This 30-day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.”
According to the U.S. Chamber of Commerce, reporting companies will be required to provide the following:
- Legal name
- Current United States address
- Taxpayer identification number
- Jurisdiction where the company was established or officially registered
Failure to complete the report can result in civil and criminal penalties.
For reporting companies created or registered on or after Jan. 1, 2024, beneficial owners will need to provide individual information as well.
To fill out the report, individuals can choose to do it on their own. However, it will not be available until Jan. 1, 2024. While there is autonomy for that individual to complete the form themselves, it is suggested that an advisor, attorney, or accountant may ensure the filing meets FinCEN’s standards.
“It may not be difficult to complete the forms, but with everything a small business owner must do to operate a successful business, I fear this is something that could be missed or not done [promptly],” Roger Harris, president of Padgett Business Services, said, according to the U.S. Chamber of Commerce.
He added, “There are some issues in the law that could require an interpretation of certain facts to determine who is a beneficial owner that must be included in the filings. If you find yourself in this situation… consult with an attorney to help you decide how your set of facts fits within this law.”