Deadline looming for millions of small businesses to report ownership under new rule
November 20, 2024
With the end of 2024 approaching, small business owners need to assess whether they have taken the necessary steps to comply with a new federal filing requirement.
More than 30 million small businesses now are required to report their beneficial owners (i.e., persons who have substantial control or own at least a 25% ownership interest) to the Financial Crimes Enforcement Network. The new requirement went into effect on January 1, 2024.
If your business existed as of January 1, 2024, you must file this information by January 1, 2025, or potentially face fines of up to $500 per day. (Different deadlines apply if your business was formed after January 1, 2024. More information is provided below.)
Honkamp can help you determine if you need to file and, if you do, assist in the filing.
What businesses are affected?
An entity must file a report if it was created in the U.S. by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe. (An “entity” includes a corporation, a limited liability company (LLC) or any entity created by the filing of a document with a secretary of state or any similar office under the law of a state, regardless of business activity or lack thereof.) Additionally, foreign companies registered to do business in any U.S. state or Indian tribe must file.
There are 23 categories of entities that are exempt. They include, for example, publicly traded companies meeting specified requirements. (The full list of exemptions is included in this document.)
Most notably, the “Large Operating Company” exemption is met if a company has ALL of the following:
- More than 20 full-time employees in the U.S.
- Operating presence at a physical office within the U.S.
- More than $5 million in gross revenue or sales from sources inside the U.S. on the prior year’s federal income tax return
Deadline reminders
The deadlines to report beneficial ownership are dependent on when the entity was created.
- If the business existed as of January 1, 2024: Beneficial ownership information must be filed by January 1, 2025.
- If the business is created after January 1, 2024, but before January 1, 2025: Beneficial ownership information must be filed within 90 days.
- If the business is created on or after January 2025: Beneficial information must be filed within 30 days.
Once a business has submitted its initial filing, companies have 30 days after any change to previously filed information to report the change, such as beneficial owner changes, legal name or physical address changes, expiration dates, etc.
Recommended steps
With civil penalties for noncompliance of up to $500 per day, we recommend that you:
- Review each entity individually to determine if any of them qualify for one of the 23 exemptions.
- Gather relevant information of beneficial owners for any entities that do not qualify for exemptions.
- Ensure timely filing of the required information.
Contact Us