New Reporting Requirements in 2024 – Everything Beauty Pros Need To Know
What is Beneficial Ownership Information reporting?
Starting January 1, 2024, LLCs and Corporations have to report who their owners are to the U.S. Treasury Department’s Financial Crimes Enforcement Network, affectionately referred to as FinCEN. Basically, the government wants to know who exactly owns each legal entity to make it easier for them to investigate crimes. As long as you’re not committing crimes, the only thing you need to be worried about is making sure that you’ve filed the report to avoid the hefty fines for noncompliance.
What are the penalties if I don’t file the Beneficial Ownership Information report?
Honestly the penalties for late or non filing for this report are almost unbelievable for small businesses. Except, it’s not some crazy nightmare. It’s actually your reality. The fines are $500 PER DAY up to $10,000. Ouch. Enough to sink many small businesses and we haven’t seen any options for relief for small business owners.
Oh, and did I mention jail time? Yeah, prison for a couple years if you’re also found to be committing a crime along with not filing.
This is definitely not something to sleep on.
Are Beneficial Ownership Information reports public information?
No, the information in these reports will be used by the government. They will not be publicly available.
When is the Beneficial Ownership Information report due?
If your LLC or Corporation was formed prior to January 1, 2024, you have until January 1, 2025 to file your first Beneficial Ownership Information report.
If your LLC or Corporation was formed on or after January 1, 2024, you have 90 days to file the report.
Beginning January 1, 2025, businesses will have 30 days to file the report from the date of their incorporation.
What information is reported on the Beneficial Ownership Information report?
The Beneficial Ownership Information report is asking for:
- The business’ legal name and DBAs
- The business’ address
- The business’ EIN
- Each owner’s Name
- Each owner’s residential address
- Each owner’s official government issued identification
Does giving away all this information make you feel uncomfortable? Maybe a little too invasive? Well, the reality is that the IRS already has all this information (and more) anyway. And, at least they’re not listening to all your conversations through your cell phone…or are they?!
Are there any exceptions to filing Beneficial Ownership Information reports?
There are some, but they don’t apply to small business entities. Oftentimes, small businesses get off the hook for this type of reporting because it’s so much harder for small businesses to comply. In this case, the only businesses that are exempt are larger corporations. Think publicly traded companies. Companies with at least 20 full-time employees. Companies with at least 5 million in revenue. So, yeah, probably not anyone reading this. The reason small businesses don’t get an exception is because most money laundering happens through small businesses and that’s what this new law is trying to stop.
Sole proprietorships and general partnerships are not considered legal entities and therefore are not required to file. Bottom line, if you’ve filed paperwork with your state’s secretary of state, then you should file.
Will my accountant be filing the Beneficial Ownership Information report for me?
It’s possible your accountant may offer this service. But I don’t recommend assuming that’s the case. This isn’t a tax or accounting filing at all so it’s not going to automatically be taken care of when you file your taxes. It’s best to reach out to your accountant and make a plan for when this will be filed so you know that you’re squared away. Pro-tip: Don’t reach out the first week in April asking for help with this report.
How do I file the Beneficial Ownership Information report?
You can file your beneficial ownership report by going to their website. I even made this handy free step-by-step guide that you can follow along with as you do your own. This guide is screenshots of the entire process from when I filed my own beneficial ownership report. Handy, indeed.
The whole process took me about 20 minutes. There’s an option to create a FinCEN profile for yourself first and I highly recommend doing that before filing the Beneficial Ownership Information report. It makes the process WAAAAY easier and faster, especially if you own more than one legal entity. Plus, it keeps your information a little more secure.
Do I need to file a Beneficial Ownership Information report every year?
The beneficial ownership information report is not an annual filing. The only time you would need to file again is to make corrections or update your information, such as a name change, address change, or when your ID expires and you get issued a new one.
How much does it cost to file the Beneficial Ownership Information report?
FinCEN does not charge any fees for the filing. However, if you use a professional, such as an accountant or attorney to file your report, you should plan on paying them a fee for their assistance.
What do I do if my name or address changes?
If your name or address changes, you will need to file an update within 30 days or you will be subject to the fines listed above.
What if I made a mistake on my Beneficial Ownership Information report?
A business will not be subject to fines as long as they make the correction within 90 days of the inaccurately filed report.
Looking for a new accountant who gets the beauty industry in 2024? We’d love to chat!