A Guide for Small Businesses Understanding Beneficial Ownership Reporting
transparency in business operations. In simple terms, it’s all about identifying the individuals who ultimately own or control a company, known as “beneficial owners.” This information is intended to help prevent illegal activities like money laundering and fraud. While it’s believed to be a crucial step toward a fair and accountable business environment, it can sometimes feel like a burden for small businesses. In addition, most small business owners have no idea what BOR reporting is or when it starts. Recently, the NFIB polled their small business members and 90% had never heard of it. BOR reporting goes into effect January 1, 2024.Who Must Report?
Beneficial Ownership Reporting applies to a range of businesses, mostly small ones. If you own or manage a business, whether it’s a sole proprietorship, partnership, corporation, or LLC, you may be required to report beneficial ownership information. The goal is to ensure that no one can hide behind a corporate veil to engage in illicit activities. If your business has more than 20 full time employees, over $5.0 million in sales and operations in the US, you do not have to file. In addition, entities that do not register with their state such as sole proprietors, general partnerships and trusts are not required to file. If your business does not fit these parameters, you should expect to be required to file.
When Does Reporting Start?
The reporting requirements vary depending on a few different factors. Reporting will typically be done at the time of business formation or registration. If your business was started before January 1, 2024, your reporting deadline is January 1, 2025. Businesses will be asked to update their reporting based on certain events, like ownership changes or significant alterations in the businesses structure. Reporting will typically be a one-time event unless there are ownership changes.
How Do Small Businesses Report?
Reporting may sound daunting, but it doesn’t sound difficult. It will be done electronically through the Treasury’s FinCEN website using a yet to be created system. The final reporting questionnaire is not available but in draft form it is 8 pages and roughly 50 questions. It appears that the information requested will be easy to retrieve by even a fairly unorganized business. The good news it will be a one-time event for most businesses.
Where Can Small Businesses Get Help?
Navigating the world of Beneficial Ownership Reporting will be challenging for some and an intrusion for many. Few want to add new reports to our already bureaucratic/burdensome system of reporting. Know that there are resources available to assist you. Consider reaching out to government agencies, legal experts, or professional services specializing in compliance. Many organizations offer guidance and support tailored to small businesses, ensuring you meet your reporting obligations without undue stress. The NBA will provide additional details and links to quality resources as the reporting process becomes more defined.
Finally, Beneficial Ownership Reporting may be a vital step toward a more transparent and accountable business landscape. While it may seem like a burden, we hope that small businesses can navigate the process with relative ease, thanks to user-friendly reporting systems and available support. By complying with these regulations, small businesses can contribute to a fairer and more just business environment that benefits everyone.
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