In a move to increase corporate transparency and combat financial crimes, the US Financial Crimes and Enforcement Network (FinCEN) now requires most US businesses to disclose information about their beneficial owners. This new regulation, part of the Corporate Transparency Act passed in 2021, is set to impact many tech startups and established companies alike.
Starting this year, founders and owners operating their startups as limited liability companies (LLCs) or corporations must submit ownership statements to FinCEN. This is generally a one-time filing unless there are changes in ownership. Non-compliance could result in penalties of up to $10,000 and two years in prison.
According to FinCEN, nearly all companies, except sole proprietorships not registered with a Secretary of State, must report details about the individuals who ultimately own or control them. FinCEN began accepting these reports on January 1, 2024.
For businesses established before this year, the deadline to file is January 1, 2025. Newly formed businesses have a shorter window to comply. As of January 1, 2024, most US startups are required to file a Beneficial Ownership Information (BOI) Report with FinCEN.
Who Qualifies as a Beneficial Owner?
A beneficial owner is defined as an individual who ultimately owns or controls a company, either through direct ownership or significant influence. The aim is to boost transparency and prevent illegal activities facilitated by anonymous companies.
Beneficial ownership information reporting: US startups must disclose their owners to comply with new FinCEN’s transparency rule
