Reporting Burden Ends for Small Businesses

A major federal reporting requirement for millions of small businesses has come to an end.

The Financial Crimes Enforcement Network (FinCEN) recently issued a final rule permanently eliminating beneficial ownership information reporting requirements for U.S. companies and individuals under the Corporate Transparency Act. FinCEN also said it will delete previously submitted ownership records filed by Americans, rolling back a law many business groups viewed as burdensome and duplicative.

The change means most U.S. small businesses will no longer have to submit ownership information to FinCEN or update that information when ownership details change. Individuals who obtained FinCEN identification numbers are also no longer required to update or correct information previously submitted to the agency.

The rule also removes requirements for foreign companies to report U.S. person company applicants and exempts certain foreign pooled investment vehicles from reporting ownership information involving Americans. Foreign entities that qualify as reporting companies must still report beneficial ownership information for foreign individuals.

For small business owners, the most immediate impact is less paperwork, fewer reporting obligations and lower compliance costs. Many entrepreneurs, family-owned businesses and startups argued that the reporting requirements created administrative burdens for companies with limited staff and resources.

The change does not, however, eliminate beneficial ownership requirements for banks. Financial institutions must continue collecting ownership information from business customers under existing customer due diligence rules. As a result, businesses opening new accounts or establishing banking relationships may still be asked to provide ownership details, even though they no longer have to report the information directly to FinCEN.