What Is Beneficial Ownership Reporting And Why Is it Important?
Beneficial ownership refers to individuals that directly or indirectly own or control a legal entity, such as a company, a trust, or a foundation. Beneficial owners are not necessarily the same as the legal owners, who are the registered shareholders or directors of the entity. For example, a legal owner may act as a nominee or a proxy for the real owner, or the entity may be owned by another entity that is itself owned by another entity, and so on.
Starting with January 1, 2024, many U.S. companies will need to submit a Beneficial Owner Report. They will share details about their beneficial owners – the people who really own or control them. This information has to be reported to the Financial Crimes Enforcement Network (FinCEN), which is part of the U.S. Department of the Treasury.
The information about beneficial ownership includes identification details of individuals who have direct or indirect control over a company. This requirement is part of the U.S. government’s initiative to prevent illicit activities by making it more difficult for individuals to hide behind shell companies or similar structures.
Federal, state, local, and tribal government officials, as well as certain foreign officials who request access through a U.S. federal agency, can see the beneficial ownership information for authorized activities related to national security, intelligence, and law enforcement. Financial institutions can also access this information under certain conditions, with the consent of the reporting company.
What FinCEN Is Planning?
The Financial Crimes Enforcement Network (FinCEN) plans to extend the deadline for certain companies to submit their initial beneficial ownership information (BOI) reports. The proposal changes the final BOI Reporting Rule, allowing companies established or registered in 2024 an additional 60 days, totaling 90 days, to file their initial reports. However, this proposed rule doesn’t affect other parts of the final BOI Reporting Rule. So, companies created or registered before January 1, 2024, still have until January 1, 2025, to file their initial BOI reports. And those created or registered on or after January 1, 2024, will have 90 days to file their initial reports.
Check the status of this proposal on FinCEN website.
You should be aware that FinCEN will not accept reports before January 1, 2024. For more information on this topic, you can refer to the Beneficial Ownership Information Reporting Rule on FinCEN’s website.
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This material is for informational purposes only. It does not constitute tax, legal or accounting advice.