In an effort to combat financial crimes such as money laundering, tax evasion, and fraud, the U.S. government has introduced new reporting requirements that affect a wide range of entities. This measure is called Beneficial Ownership Reporting, and it is part of the larger regulatory framework established by the Corporate Transparency Act (CTA). At J&M Accounting, we understand the complexity of these regulations and are here to guide you through the process. Below, we explain what beneficial ownership reporting entails, who is required to file, and how to navigate the filing process efficiently.
What is Beneficial Ownership Reporting?
Beneficial ownership reporting is a legal requirement for certain businesses and organizations to disclose the identities of individuals who own or control a significant portion of the entity. The purpose is to ensure transparency about who ultimately benefits from or controls the organization, reducing opportunities for illegal financial activities.
This reporting is primarily administered by the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. Under this regulation, entities must provide key identifying information about their beneficial owners.
A beneficial owner is defined as any individual who:
Directly or indirectly owns 25% or more of the company, or
Exercises substantial control over the company.
Who Needs to File?
Not every business or organization is required to file. However, the Corporate Transparency Act mandates that most corporations, limited liability companies (LLCs), and similar entities in the U.S. must comply.
Entities that are exempt from filing include:
Large operating companies with over 20 employees, over $5 million in revenue, and a physical presence in the U.S.
Publicly traded companies already subject to SEC reporting requirements.
Certain regulated entities such as banks, credit unions, and insurance companies.
Nonprofits, religious organizations, and certain government-owned entities.
If your business does not fall into one of these exemptions, it’s likely that you’ll need to file a beneficial ownership report.
What Information Needs to be Reported?
The required information for each beneficial owner includes:
Full Legal Name
Date of Birth
Residential or Business Address
A Unique Identifying Number from an acceptable form of identification (such as a passport, driver's license, or FinCEN identifier).
When is the Filing Deadline?
For companies formed after January 1, 2024, beneficial ownership reporting must be submitted within 30 days of formation. Existing entities have until January 1, 2025 to file their initial report. Changes in beneficial ownership or inaccuracies in the report must be updated within 30 days of any change.
How to File Beneficial Ownership Reports
Filing beneficial ownership reports is a straightforward process, but it is essential to get it right to avoid potential fines or penalties. Here’s a breakdown of how to submit your report:
Register for a FinCEN Account
Filing must be done electronically via the FinCEN reporting system. To start, you need to create an account on the FinCEN portal.
Complete the Beneficial Ownership Report Form
Once registered, you'll fill out the required form, providing the necessary information about each beneficial owner.
Submit and Maintain Compliance
After submitting the report, it’s important to maintain compliance. If there are any changes to your entity’s ownership structure, you must submit an updated report within 30 days.
Why Compliance is Crucial
Failure to comply with the beneficial ownership reporting requirements can result in severe penalties, including:
Civil penalties of up to $500 per day for non-compliance.
Criminal penalties, including fines of up to $10,000 and potential imprisonment for willful violations.
Given the consequences, it’s crucial to understand if and when your business needs to file, and to ensure that the information you provide is accurate and up to date.
How J&M Accounting Can Help
At J&M Accounting, we specialize in helping businesses navigate the complexities of regulatory compliance, including beneficial ownership reporting. Our experienced team can:
Assess whether your entity is subject to reporting requirements.
Gather the necessary information and file reports on your behalf.
Help you stay compliant with ongoing reporting requirements and updates.
Let us take the burden off your shoulders so you can focus on growing your business. Contact us today to discuss how we can assist you with your beneficial ownership reporting obligations.
Disclaimer: This article is for informational purposes only and should not be construed as legal or tax advice. For specific guidance related to your business or organization, consult with your accountant or legal advisor
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