One of the challenging parts of running a small business is keeping up with the various regulations that change over time. If you are doing business in the United States, there is a new regulation that has come into effect. As Handmade Seller Magazine, I am also subject to this requirement. I can also say it took me all of 5 minutes to file the appropriate paperwork. Don’t panic about this new requirement- read on to understand what it is and where to file if you haven’t already done so.
What’s the new regulation?
As part of the Corporate Transparency Act passed in 2021, Congress enacted legislation intended to curb illicit finance. Essentially, the law seeks to understand who controls a company. While often legislation targets large corporations, in this case it is different. This applies to all companies that meet the criteria regardless of size.
“Effective January 1, 2024, many companies in the United States must report information about their beneficial owners—the individuals who ultimately own or control the company—to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. Filing is simple, secure, and free of charge. Beneficial ownership information reporting is not an annual requirement. Unless a company needs to update or correct information, a report only needs to be submitted once.” Source: https://fincen.gov/boi
Who has to report?
If you are an artisan business that has registered an LLC for your business, this requirement will apply to you. Per the FinCen site:
“Your company may need to report information about its beneficial owners if it is: 1. a corporation, a limited liability company (LLC), or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe; or 2. a foreign company and was registered to do business in any U.S. state or Indian tribe by such a filing.
Reporting companies report beneficial ownership information electronically through FinCEN’s website: www.fincen.gov/boi. The system provides a confirmation of receipt once a completed report is filed with FinCEN.” (Source: https://fincen.gov/boi)
When do I have to complete reporting?
For most artisan businesses that were set up and registered prior to Jan 1, 2024, the requirements to register is before Jan 1 2025. We are in the grace period while all the businesses have time to get registered. Per FinCEN:
“FinCEN began accepting reports on January 1, 2024. • If your company was created or registered prior to January 1, 2024, you will have until January 1, 2025 to report BOI. • If your company is created or registered in 2024, you must report BOI within 90 calendar days after receiving actual or public notice that your company’s creation or registration is effective, whichever is earlier. • If your company is created or registered on or after January 1, 2025, you must file BOI within 30 calendar days after receiving actual or public notice that its creation or registration is effective. • Any updates or corrections to beneficial ownership information that you previously filed with FinCEN must be submitted within 30 days.”
Since the regulation started coming into effect, we have also had several hurricanes in the US. Due to various hurricanes, some jurisdictions have had their filing deadline extended, and this information can be found directly on FinCen’s website as well if you are in an impacted area.
What happens if I just ignore it?
This is where it can potentially get difficult. There are severe fines for willful ignorance of this law. Since we are not yet at the due date for companies created before this year, we don’t yet know how rigorously this will be enforced. It’s best to just complete the compliance if it applies to you as it is a pretty simple process.
Here is what is documented on the potential fines:
“As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. However, this civil penalty amount is adjusted annually for inflation. As of the time of publication of this FAQ, this amount is $591.
A person who willfully violates the BOI reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.” Source: https://fincen.gov/boi
What's it all mean?
Bringing this full circle- this is simply a new regulation put in the place by the US to ensure there is clear traceability to who owns entities. It sounds terribly scary, but is really just an additional registration process for companies. In the future, most companies will do this as they register new entities. The process is pretty straightforward, and will only take a few minutes to ensure your business is compliant!
