Starting January 1, 2024, virtually all small businesses are required to report information about the individuals who own or control the business (called “beneficial owners”) to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.
Reporting companies include California corporations and limited liability companies (LLCs) established with the California Secretary of State.
In order to fulfill your reporting obligations, you will need to provide information to FinCEN about: (a) the “beneficial owners” of your company; and, if your company was created after January 1, 2024, (b) the “company applicant(s).”
Who are Beneficial Owners?
Beneficial owners are any individual who exercises substantial control over a reporting company, or an individual who owns or controls at least 25% of the ownership interest in the company.
An individual has substantial control if they:
- Are a senior officer;
- Have authority to appoint or remove certain officers or a majority of directors;
- Are an important decision maker;
- Are the trustee of a trust that owns the entity;
- Have any other form of substantial control over the company.Who are Company Applicants?A “company applicant” is: (a) the individual who filed the document that created or first registered to company; or (b) the individual who was primarily responsible for directing or controlling the filing.
WHAT INFORMATION DO YOU NEED TO REPORT?
You will need to include all of the following information in your FinCEN report:
- Legal name of your entity;
- Trade name, if any;
- US address for your entity;
- Jurisdiction of formation (California)
- Tax ID number (EIN)
- Legal name of all “beneficial owners” (see above for definition)
- Date of birth of all “beneficial owners”
- Residential address of all “beneficial owners”
- Identifying number, jurisdiction, and a picture of either: (a) US passport; (b) a state driver’s license; or (c) a state-issued identification for all “beneficial owners”
WHEN DOES MY COMPANY NEED TO REPORT?
- Companies existing before January 1, 2024 need to complete their report no later than January 1, 2025.
- Companies created during 2024 need to complete their report no later than 90 days after entity creation.
- Companies created after 2024 need to complete their report no later than 30 days after entity creation.
NOTE: Any changes, updates, or corrections to previously reported information must be reported 30 days after the change or inaccuracy. Accordingly, anytime the information above changes (for example, due to a residential move), you will need to update your FinCEN report.
WHAT ARE THE PENALTIES FOR FAILURE TO REPORT?
Willful failure to complete the report can result in civil penalties of $500 per day up to $10,000, and, in an extreme scenario, criminal penalties of two years’ imprisonment. Senior company officers may be held personally liable for penalties.
You can complete your beneficial ownership report online at the FinCEN website here:
http://www.fincen.gov/boi
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