Audience: Founders, Entrepreneurs, Small Businesses, and their Funders
Executive Summary on Top-Founders, Entrepreneurs, and small businesses should ensure they understand the upcoming Beneficial Ownership Reporting obligations starting on January 1, 2024.
Meris Law PLLC would like to bring to your attention a significant regulatory change that will be coming into effect on January 1, 2024, which pertains to the reporting of beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN).
Background: On September 30, 2022, FinCEN issued a mandate that requires certain companies to report specific details concerning their beneficial owners. This initiative is a critical step toward eradicating the misuse of shell companies by malicious entities intending to perpetrate illegal activities.
Definition of Beneficial Owner: For this reporting requirement, a beneficial owner is defined as any individual who, directly or indirectly, exercises substantial control over a company, owns 25% or more of the company's equity interests, or receives substantial economic benefits from the company's assets.
Reporting Requirements: Companies subject to this mandate must furnish information such as the name, date of birth, address, and unique identifying number (from a document such as a passport or driver's license) of each beneficial owner.
Compliance Guide: FinCEN has proactively prepared a Small Entity Compliance Guide, accessible on its official website. This guide is an invaluable resource that comprehensively breaks the reporting requirements and offers practical guidance on ensuring compliance.
Potential Considerations:
Entities impacted by this regulatory change may consider preparations to ensure full compliance by the January 1, 2024 deadline. Including, but not limited to:
Identifying all beneficial owners of our company as defined by FinCEN.
Collecting the required information from each beneficial owner.
Establishing protocols for reporting this information to FinCEN promptly and accurately.
Familiarizing ourselves with the Small Entity Compliance Guide and incorporating its guidelines into our compliance strategy.
Implications of Non-Compliance: Failure to adhere to these reporting requirements may result in substantial penalties and reputational damage, impacted entities should consider and allocate the necessary resources to ensure compliance.
Contributors:
Hope Newsome, Esq.
Samantha Osbourne, Esq.
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