Renner Business News; June 16, 2023

There will be a new filing requirement for businesses effective Jan. 1, 2024. 

In 2021, as part of the National Defense Act, the Financial Crimes Enforcement Network (FinCEN) created the Corporate Transparency Act. All business entities—domestic or foreign— that have filed formation documents with a U.S. state must file a Beneficial Ownership Information Report.

It may seem as an overreach into our normal operating business, but as the business world expands internationally required reporting such as FinCen BOI will help root out foreign entities seeking to evade U.S. sanctions, criminals intending to defraud others, drug traffickers, and others who try to hide behind shell companies.

“Many of our clients are not exempt from this filing requirement,” said Paige Mason, tax manager at Renner and Company. “There is still some time before existing entities are required to begin filing but it will be here before we know it.”

There are 23 exceptions to the filing requirement that are each listed on the FinCEN website. Large entities with more than 20 employees that gross revenue over $5,000,000 and have a physical office in the U.S. do not need to file.

However, that means that many small businesses or LLCs will be required to complete the report. 

It is an informational report, which indicates the legal name of the entity, any DBAs or trade names, the business address, state of formation/registration, IRS TIN and the birthdate, address, and unique ID number from an acceptable identification document for the beneficial owners and company applicants. An image of the acceptable identification must also be provided.

“Renner is already in the planning process to handle this new filing requirement,” Paige said.

A beneficial owner is any individual who owns at least 25% of your company or whom exercises substantial control over the company. 

A company applicant is the individual who files the document to create the entity or the individual primarily responsible for filing the document. Only entities created after Jan. 1, 2024 are required to report a company applicant. 

For existing entities, the report is not due until Jan. 1, 2025. For new entities formed after Jan. 1, 2024, the report is due 30 days after notice of registration with the state. Though the system is still in development, the report will be required to be electronically filed through the FinCEN website.

If there are any changes or inaccuracies on the initially filed report, an updated report must be filed within 30 days of the change.

Penalties for noncompliance include civil penalties up to $500 per day and criminal penalties include a $10,000 fine and/or up to two years imprisonment. 

There’s more to know about this. Please contact Renner and Company if you have any questions about the new filing requirement, or to determine if you are required to file.

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