Many small businesses will be impacted by a new law called the Corporate Transparency Act that goes into place on January 1, 2024. This law requires certain businesses to report their ownership information to the government. Its goal is to make it harder for criminals to hide or otherwise benefit from ill-gotten gains through shell companies or other unclear ownership structures. In short, it requires businesses to share more information to help identify the people who own and control the company.
While this change is significant, the actual process for businesses to comply is simple and straightforward.
What Changes Will My Business Need to Make?
Businesses that will be required to report this additional information are referred to as “reporting companies”. They will need to provide information about their beneficial owners, which are individuals who own and control the company.
Reporting companies include:
- Corporations, limited liability companies, or other businesses created in the U.S.
- Foreign companies that are registered to do business in the U.S. or are part of an Indian tribe.
Your business may be exempt from providing this information if it is a publicly traded company or nonprofit. Some businesses with more than 20 full-time employees are also exempt. There are also 23 specific types of businesses that are exempt, including accounting firms, insurance companies, and investment advisors. You can find more information about which businesses are exempt by reviewing FinCEN’s Small Entity Compliance Guide. FinCEN has also created a list of Frequently Asked Questions that can provide insight into whether or not the law applies to your organization.
When Do I Have to Fulfill My Reporting Requirements?
If your business qualifies as a reporting company, and it was established before 2024, you will have until January 1, 2025 to take the necessary steps to provide FinCEN with the required information about your company’s owners. Any reporting company that is established in 2024 will have to report its beneficial ownership information within 90 days of the registration of the company or the notice of the creation of the business. If you create and register a business after January 1, 2025, you will have 30 days to file required reporting. If your company’s ownership information changes at any point, you will be required to report those changes within 30 days.
How Do I Report?
FinCEN will begin accepting beneficial ownership information on January 1, 2024. There is no need to report your ownership information prior to that time, as they cannot accept it. The reporting process has been set up to be as easy and efficient as possible for your business. You will be able to file the necessary information about beneficial ownership of your company through a secured electronic system on FinCEN’s website, which will be available at the start of 2024.
If you are a BankFive business customer and are unsure if your company is considered a “reporting company”, we encourage you to reach out to your dedicated business banker for additional clarification and assistance.