January 12, 2021
New Law Requires Small Companies to Report 25% Owners (U.S. or Foreign)
Posted by Marcus Sharei
There is a new U.S. requirement to provide information to the federal government concerning the ownership of a company or similar entity formed under local state law. The new law, passed as part of the Defense Authorization Act of 2021, requires disclosure of 25% individual beneficial owners of U.S. entities.
Who Does This Apply To?
Corporations, limited liability companies, and other similar entities formed in the U.S. or foreign entities registered to do business in the U.S. must now report their beneficial owners (any U.S. or foreign individual who owns 25% or more equity interest in a U.S. legal entity) to the U.S. Department of the Treasury.
Who Is Required to File?
U.S. companies with 25% or more beneficial individual owners must make disclosure to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) bureau, unless they meet all three requirements below (exempted entities):
- Employs more than 20 employees on a full-time basis in the United States
- Filed U.S. federal income tax returns in the previous year demonstrating more than $5 million in gross receipts or sales in the aggregate (including the receipts or sales of other entities owned by the company and other entities through which the company operates)
- Has an operating presence at a physical office within the United States
When Is the Filing Due?
Completion of a beneficial ownership statement must be filed with the Department of Treasury at these times:
- When the company is formed,
- When ownership changes (25% owner)
- If the entity was previously formed before passage of the Act (on Jan. 1, 2021), within two years after the effective date of the issuance by the Treasury Department of its final regulations
What Happens If You Do Not File?
Penalties for non-compliance under FinCEN generally include up to a $250,000 fine and five years imprisonment (if willful non-compliance).
Organizations should determine they meet the filing disclosure criteria and identify their 25% beneficial owners.
Contact our experts with any questions.
Marcus specializes in international tax structuring, cross-border transactions, transfer pricing, merger & acquisition integration, and global earnings mobility strategies. He has extensive experience in the manufacturing, internet, software, computer hardware, biotech, and services industries.
Marcus is a Certified Public Accountant and earned his Bachelor of Arts at University of California, Berkeley, and Master’s in Taxation and MBA degrees at Golden Gate University. He is also a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants.