Beginning on January 1, 2024, many companies in USA have to report information about their beneficial owners, i.e., the individuals who ultimately own or control the company. They have to report the information to the Financial Crimes Enforcement Network (FinCEN).
In an effort to help prevent tax fraud and other unlawful financing activities, the Financial Crimes Enforcement Network (FinCEN) has issued final rules related to ownership disclosure obligations for U.S. entities. The final rule is effective January 1, 2024.
The new disclosure requirements were mandated under the 2021 Corporate Transparency Act (CTA) and will provide the U.S. with a centralized aggregation of the information about who controls, operates and/or owns private U.S. entities.
Under the rules, the following types of companies would have to comply with the reporting rules and disclose beneficial ownership. Domestic reporting companies: U.S. corporations, limited liability companies (LLCs), or any other entity created by the filing of formation documents with a state or any similar office under the law of a state or Indian tribe.
There are specific exemptions from the definition of reporting company under the CTA. These include accounting firms, banks, SEC reporting issuers, credit unions, governmental authorities, money transmitting businesses, brokers and dealers, venture capital funds and other investment advisers. Broadly, those exempt from the reporting rules are those which already have ownership disclosure requirements through other regulatory oversight.
The final rule defines a beneficial owner as any individual who, directly or indirectly,
- Exercises substantial control over a reporting company, or
- Owns or controls at least 25% of the ownership interests of a reporting company.
Substantial control essentially exists if anyone can make important decisions on behalf of an entity. The standards and mechanisms to determine a 25% ownership cover certain scenarios such as holding ownership interests in a trust.
BizStarter will take care of your beneficial ownership information report. Fill out the form below to order our service.