If you own or operate a small business or partnership of any kind, read this carefully because it may save you thousands of dollars in civil penalties.
A new federally-mandated business ownership reporting requirements went into effect January 1, 2024. The new law hasn't been well publicized, which is really a shame considering how many people will be affected. The basic idea is that all businesses have to disclose their beneficial owners in order to help combat money laundering, terrorist financing, and other financial crimes. To accomplish this goal, the law casts a wide net. If your business is registered with the local Secretary of State, there is a good chance that it will have to disclose personal information about owners.
More information can be found at the Financial Crimes Enforcement Network's website: www.fincen.gov/boi. Business owners should contact their tax preparer or attorney for detailed information, but there are a few important details we'd like bring to your attention:
Companies are only required to disclose personal information for those who own at least 25% of a company, or for those who exercise "substantial control." If you own shares in Microsoft, neither you nor the corporation is required to report that investment.
Plenty of exceptions to the requirement exist, but they generally apply to companies that already supply the government with detailed information about ownership and operations. (For example, banks and securities exchanges are exempt because they are so tightly regulated.)
This is not an annual requirement. The deadline to supply this information is January 1, 2025, and updates only need to be made when a company's ownership changes. There is no fee to file, and many small businesses should have this information already close at hand.
Penalties for failing to file are harsh: civil fines of $500 per day of non-compliance, but it's notable that this only applies to willful violations of the law.
We think most of our readers affected by this law will be able to achieve full compliance in an hour or less. Considering the penalties, it's worth a few minutes of your time to confirm the details on what needs to be disclosed to Uncle Sam.