Beneficial Ownership Reporting: What it Means for Your Business

What is Beneficial Ownership Reporting?
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Before diving into how the reporting works, it's important to first understand what beneficial ownership actually means. In simple terms, a beneficial owner is anyone who directly or indirectly owns or controls 25% or more of a business. This could include the founder, key shareholders, or other individuals who have significant influence over the company’s operations or financial decisions.
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Why is Beneficial Ownership Reporting Required?
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The Corporate Transparency Act (CTA), which mandates Beneficial Ownership Reporting, was passed as part of a broader set of anti-money laundering efforts under the Anti-Money Laundering Act of 2020. The goal is to increase transparency by ensuring that the government knows who really controls a company, especially in situations where ownership might be hidden or complicated.
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This new reporting requirement aims to:
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• Prevent financial crimes: By identifying who controls a business, authorities can track and prevent illegal activities such as money laundering, fraud, and tax evasion.
• Enhance transparency: BOI reporting makes it harder for individuals to hide their financial involvement in businesses through shell companies.
• Comply with global standards: The U.S. is aligning with other countries that have similar beneficial ownership disclosure requirements.
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For small business owners, this means that the federal government needs to know who’s behind your business, even if that person is not listed as the official owner on paper.
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Who Needs to Report?
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Not every business is required to report under the Corporate Transparency Act, but the majority of small and medium-sized companies will need to comply. Here’s a breakdown of the businesses that must submit Beneficial Ownership Information:
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• LLCs and Corporations: Most limited liability companies (LLCs) and corporations in the U.S. will need to report, especially those with fewer than 20 employees or less than $5 million in revenue. This includes many small businesses and startups.
• Limited Partnerships: If your business operates as a limited partnership, you will also need to file beneficial ownership reports.
• Real Estate Investment Entities: If you are a real estate investor who holds properties through an LLC or similar structure, you will likely be required to disclose beneficial ownership.
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Who is Exempt from Reporting?
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While most small businesses will need to report, there are some notable exemptions:
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• Publicly Traded Companies: Businesses that are listed on stock exchanges and already comply with Securities and Exchange Commission (SEC) requirements are exempt.
• Larger Entities: Companies with more than 20 employees and over $5 million in revenue may be exempt, as long as they operate from a physical office in the U.S.
• Certain Nonprofits: Many charitable organizations and other nonprofit entities do not need to report their beneficial ownership.
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If you’re unsure whether your business qualifies for an exemption, it’s always a good idea to consult with a CPA or legal professional to clarify your obligations.
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What Information Needs to Be Reported?
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Once you’ve determined that your business is subject to BOI reporting, the next step is understanding what exactly needs to be reported. The Financial Crimes Enforcement Network (FinCEN), which oversees the implementation of BOI reporting, requires the following details about each beneficial owner:
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• Full Name: The legal name of the beneficial owner.
• Date of Birth: The beneficial owner’s date of birth.
• Current Address: A residential or business address where the beneficial owner can be reached.
• Identification Number: This can be a passport number, driver’s license number, or other government-issued identification number.
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Businesses must submit this information to FinCEN, and it’s important to note that the information will not be publicly available. FinCEN will use this data for regulatory purposes, and only law enforcement agencies will have access to it.
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Deadlines for Compliance
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The Corporate Transparency Act was passed in 2020, but businesses are expected to comply with the new reporting requirements starting in 2024. Here are the key deadlines to keep in mind:
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• Existing Businesses: Any business that was formed before January 1, 2024, has until January 1, 2025, to file its initial report.
• New Businesses: Any business formed on or after January 1, 2024, must file its report within 30 days of formation.
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It’s critical to stay on top of these deadlines to avoid penalties, which brings us to the next important point: the consequences of non-compliance.

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Penalties for Non-Compliance
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Failing to comply with BOI reporting requirements can result in serious consequences. The federal government takes transparency and anti-money laundering regulations very seriously, and businesses that do not submit accurate and timely reports could face:
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• Fines: Businesses may be subject to civil penalties of up to $500 per day for each day they fail to report.
• Criminal Charges: In more serious cases, individuals responsible for not complying may face criminal penalties, including up to two years in prison.
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Given the potential consequences, it’s essential that business owners take the necessary steps to meet the reporting requirements. Fortunately, there are ways to make the process more manageable.
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How to Ensure Compliance with Beneficial Ownership Reporting
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Staying compliant with BOI reporting may seem daunting, but there are several steps you can take to simplify the process and ensure accuracy:
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1. Review Your Business Structure: Take a close look at your ownership structure to identify who qualifies as a beneficial owner. This includes not only direct owners but also anyone who may control decision-making within the company.
2. Collect Required Information: Gather the necessary details (name, address, ID number) for each beneficial owner and store them securely.
3. File Early: Don’t wait until the last minute to submit your report. Filing early will give you time to correct any mistakes and avoid last-minute stress.
4. Work with a CPA: CPAs can help you understand the requirements, gather the right information, and submit reports on time.
5. Stay Informed: Regulations can change, so make sure to stay updated on any new developments in BOI reporting requirements by consulting with a CPA or visiting the FinCEN website regularly.
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Planning for the Future: Why Beneficial Ownership Reporting Matters
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While BOI reporting might seem like just another administrative task, it serves a greater purpose in protecting your business and the broader economy. By complying with these new regulations, you’re helping to combat illegal financial activity and contributing to a more transparent business environment.

Moreover, as your business grows, having accurate ownership records will help you make better financial decisions, attract investors, and ensure long-term stability. A strong foundation of compliance will set your business up for success as regulations continue to evolve in the future.
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Conclusion
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As we move into 2024, Beneficial Ownership Reporting is something that every small business owner should be aware of. Though it may seem like an added layer of complexity, understanding the basics of who qualifies as a beneficial owner and what information needs to be reported will save you time, money, and potential legal trouble.

By staying organized and consulting with a CPA, you can ensure that your business meets the new requirements and remains compliant.

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