Your business MUST now report ownership information to the federal government or face steep penalties. A significant shift has occurred in the waters of American businesses, in the heretofore vague reporting rules of ownership and control within corporations and LLCs.
Why the Change?
This change, the Corporate Transparency Act, mandates a powerful new level of disclosure intended to disrupt crimes such as corruption, fraud, and drug trafficking.
At its heart, this legislation introduces a new level of accountability and transparency amid ownership, making it harder for ill-intentioned individuals to misuse business structures for fraudulent purposes. Supporters position it as a step toward ensuring a marketplace with more trust and integrity.
What is the Change?
The act requires businesses across the nation to report key details about the people who pull the strings and hold the stakes in these entities.
Underneath the umbrella of compliance, the Act requires the disclosure of names, addresses, and other identifying details of beneficial owners—those to whom the financial gain goes—key decision-makers, and those with a significant stake in the company’s success or direction.
It’s a broad sweep, designed to capture a full picture of business ownership. All affected businesses must report the nature of their ownership structure to the federal watchdog, the Financial Crimes Enforcement Network (FinCEN).
What’s on the Line?
The Act is not without teeth; it was passed with broad bi-partisan support and is expected to equip law enforcement and national security agencies with the necessary resources to disrupt the financial anonymity enabling crime.
And beyond keeping the business landscape transparent, it’s about protecting you and your operation from steep fines and legal pitfalls. Failure to provide filings, incomplete filings, or willfully inaccurate filings are expected to lead to non-nominal fines and, in more severe cases, criminal penalties including imprisonment.
Who Needs to Pay Attention?
If you’re at the helm of a corporation or LLC, small or large, this message is for you. Nearly all small and medium corporations and LLCs will need to report. The Act casts a wide net, capturing a detailed snapshot of those with a significant share of the organization. In other words: if it’s your business, it’s your responsibility.
Filing Requirements
You’ll be sharing the who’s who of your business with FinCEN, including personal and identifying details for the individuals who steer the ship. Changes in ownership or control? You’ve got a 30-day window to update your information, keeping everything current.
The Timeline
While the act is effective as of January 2024, existing businesses have until January 1, 2025, to file an initial report. It’s a generous window, but one that will close before you know it.
New businesses established in 2024 have a 90-day grace period from the formation date. Beyond that, the timeline tightens, emphasizing the importance of prompt action.
For more information directly from FinCEN, see the continually renewed guidance available at www.fincen.gov/boi.
Allevity is here to help. Reach out, let’s chat, and we’ll make this transition as smooth and straightforward as possible.
