New federal filing requirement impacts businesses. When should you file?
July 29, 2024
With a new federal filing requirement in place, recently launched businesses need to act quickly, while longer-established operations might benefit from continuing to wait.
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.
Deadline reminders
The deadlines to report beneficial ownership are dependent on when the entity was created, so the clock is already ticking for some businesses. While there has been litigation in relation to these new rules, these deadlines remain in place. (Note: These deadlines only impact affected businesses. The next section highlights which businesses are impacted.)
If the business existed as of January 1, 2024: Beneficial ownership information must be filed by January 1, 2025.
Key takeaway: Many of these businesses might have filed already, but if it falls into the group that hasn’t done so yet, entities may consider waiting until closer to the deadline to avoid potential additional filing needs.
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.
We encourage entities that are interested in Honkamp’s assistance to reach out now, so we can plan accordingly to assist you when you are ready to file.
If the business is created after January 1, 2024, but before January 1, 2025: Beneficial ownership information must be filed within 90 days.
Key takeaway: If a new entity was already launched in 2024, it is on the clock.
If the business is created on or after January 2025: Beneficial information must be filed within 30 days.
Key takeaway: The window to report beneficial ownership information is shortened from 90 to 30 days next year.
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. 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
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.
If you have questions about this new requirement, contact Honkamp.