If you are the owner of a small optical or optometry office, you probably are fully aware of this, but we felt it worth sharing for those who were not. Starting January 1, 2024, most small businesses will have to report information about their beneficial owners to the Financial Crime Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. Beneficial owners are individuals who own or control the business.
New Federal Reporting Requirement for Beneficial Owner Information
Who is required to report?
Companies that are required to report include corporations, limited liability companies (LLCs), or other entities created or registered by filing documents with the Secretary of State or similar state office.
Who is exempt?
There are twenty-three types of entities including publicly traded companies, nonprofits, and certain large operating companies that are exempt.
Certain large operating companies that have
- More than 20 full-time employees
- More than $5 million in annual gross sales
- A physical operating presence in the US
Who needs to be reported?
Beneficial owners - Any individual who exercises substantial control over a reporting company or owns or controls at least 25% of the ownership interest of a reporting company.
Substantial control - An individual has substantial control if:
- They are a senior officer
- They have the authority to appoint or remove certain officers or a majority of directions
- They are an important decision maker with substantial control over the company
What is an ownership interest?
An ownership interest includes one or more of the following
- Equity, stock, or voting rights
- A capital or profit interest
- Convertible instruments
- Options or other non-binding privileges to buy or sell any of the foregoing
- Any other instrument, contact, or other mechanism used to establish ownership
What needs to be reported?
- Reporting companies need to report legal name, trade name, US address, jurisdiction of formation, and tax ID number
- Beneficial owners need to report their legal name, date of birth, residential address, and some form of ID such as a US Passport or driver's license number and image of their ID
WHEN DOES MY COMPANY NEED TO REPORT?
- Existing companies created before Jan 1, 2024, have a due date of Jan 1, 2025
- New companies created during 2024 have 90 days after entity creation to report
- New companies created after 2024 have 30 days after entity creation to report
WHEN ARE CHANGES, UPDATES, AND CORRECTIONS REPORTED?
Any changes, updates, or corrections to previously reported information must be made within 30 days of the change or inaccuracy. This includes adding or removing officers/directors or updating the address of any beneficial owner or individual with substantial control. It's important to note that if the Reporting Company mandates that all beneficial owners and individuals with substantial control obtain an FINCEN Identifier Number, the responsibility for making these changes falls on the individual rather than the Reporting Company.
There are some serious penalties for failing to report
- Civil penalties - $500 per day with a $10,000 maximum
- Criminal penalties - Two years' imprisonment and senior company officers may be held personally liable for penalties
More information can be found at fincen.gov/boi-faqs.