New Beneficial Ownership Reporting Requirements And How They May Impact Your Business
New regulations are in the process of being finalized that may require you to report information to the Financial Crimes Enforcement Network (“FinCEN”) regarding the ownership of your company.
On January 1, 2021, Congress enacted the Corporate Transparency Act (“CTA”), which will require companies to report their beneficial ownership to FinCEN as part of an anti-money laundering effort.
Will I Have Reporting Requirements To Comply With?
All companies are a “reporting company”, subject to the new ownership reporting requirements, unless they fall into specific exemptions. These exemptions generally target companies already subject to regulated industries including, but not limited to, banks, insurance companies, accounting firms, tax-exempt entities, and large operating companies (with more than 20 employees and more than $5 million in gross receipts or sales).
What Will I Have to Report?
A reporting company will have to report certain information for (1) “beneficial owners”, meaning anyone who owns 25% or more of such company or who otherwise exercises substantial control over the company, and (2) “company applicants”, meaning the person who files or (under the proposed regulations) directs the filing of the formation documents of a reporting company. This information includes the person’s name, date of birth, address and unique identifying number (i.e., a passport, driver’s license or other state-issued identifier).
When Will I Have to Make the Report?
Existing companies may have as little as one year from the effective date of the final regulations to make a beneficial ownership report to FinCEN, while new companies going forward will have fourteen calendar days after their formation documents are filed with the applicable secretary of state. Although Congress passed the CTA early last year, the regulations are still in the process of being promulgated, with the comment period on the proposed regulations ending this past February.
What Should I Do Next?
With the effective date of final regulations approaching, business owners should evaluate whether they will likely be required to file beneficial ownership reports and begin gathering information required to make such filing.
Reach out to McGrath North’s Business Corporate group today to get up-to-date tailored assistance on upcoming reporting requirements under the Corporate Transparency Act.
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