New reporting requirement for small business owners goes into effect Jan. 1, 2024
In an NFIB survey, 90% of NFIB members had never heard of the new small business ownership information reporting requirement regulation, set to take effect in January 2024. On September 18, NFIB sent a letter to the U.S. House Financial Services Committee expressing disappointment that the committee did not consider stronger legislation to delay or repeal the small business ownership information regulation. This is a substantial regulation that only affects small business owners.
This federal law is set to expand the role of the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) to collect and store confidential personal information about small businesses that have 20 or fewer full-time employees and the individuals who ultimately own or control a company, known as the beneficial owners.
To make matters worse and more difficult for small business, FinCEN released a 56-page compliance guide for the beneficial ownership information regulation. NFIB Vice President of Federal Government Relations Kevin Kuhlman recently testified before the U.S. House of Representatives Committee on Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions and was quoted in a Thomson Reuters article reacting to the release of the FinCEN Small Entity Compliance Guide.
Kuhlman said the new FinCEN guide “more demonstrates the problems than answers the questions. What I think the compliance guide demonstrates is what began as ‘a simple and basic request’ for four pieces of information has turned into a very complicated 56-page compliance guide … that will overwhelm small businesses,” Kuhlman said on Monday. “NFIB would be supportive of taking a pause — delaying the requirements either administratively or by legislation — to improve the outreach, simplify the process, and allow business owners to better understand their compliance responsibilities.”
The rule will affect a broad spectrum of businesses (U.S. and non-U.S. entities including LLCs, corporations, and entities formed under state or tribal laws) and require them to begin filing reports on their beneficial owners to FinCEN. Small businesses with 20 or fewer full-time employees and $5 million or less in gross receipts or sales as reflected in the previous year’s federal tax returns will fall under the new reporting requirement.
“This is going to require 32.6 million small businesses to register their beneficial ownership information with the Financial Crimes Enforcement Network by January 1, 2024,” said NFIB Government Relations Director Jeff Brabant. “Anyone who has a 25% or greater stake in the company or is a senior officer will have to register a copy of their driver’s license and business information. This is a daunting task and probably the biggest regulation that no one is talking about right now.”
NFIB will continue to push for a full repeal or delay of this legislation and urges FinCEN to provide more substantial outreach and education on this requirement to small business owners. Listen to the Small Business Rundown for a full advocacy update on this requirement and other current legislation.