To all of our clients and trusts with business ownership, a new law has gone into effect this year requiring additional reporting about such business’s owners to FinCEN (Financial Crimes Enforcement Network). This new law requires a Reporting Company to report its Beneficial Owners and Company Applicants to FinCEN.
What does this mean?
First, we must define which companies fall into the Reporting Company definition. A Reporting Company is defined as a corporation, LLC, or anything else that files documents with the Secretary of State, but does not include trusts, sole proprietors, and general partnerships. There are twenty-three exemptions within this that do not have to report.
Next, we define who and what a Beneficial Owner is. A Beneficial Owner is anyone or anything that exercises substantial control over the business, including senior officers, people who have control over appointing and removing senior officers, people who have control over a majority of the company’s board of directors, anyone who can control important decisions to be made by the Reporting Company, or anyone or anything that owns twenty-five percent or more of the Reporting Company.
Last, Company Applicants are defined as people who filed the documents to create any Reporting Company that was formed after January 1, 2024. This definition does not include anyone who filed the documents to create a company before January 1, 2024.
What must be reported?
The Reporting Company’s legal name, trade name, the Beneficial Owners, the Company Applicants, the address of the business, the jurisdiction of formation of the business, and the taxpayer ID number. In addition, the Beneficial Owners names, date of birth, personal address, and ID picture or FinCEN ID number must be provided. The same goes for Company Applicants although the Company Applicant’s business address may be used.
There are penalties for anyone who willingly provides false information or willfully fails to report complete or updated information.
In many of our client’s cases, they own a business which are subject to this new rule, or if their trust owns a business, their trusts including trustees and beneficiaries may be considered Beneficial Owners. This body of law is new and evolving but we encourage all of our clients to review the information contained in the link below, thoroughly, and to make sure they report if they are subject to the new law.
