Most companies unaware of beneficial ownership rules

Even though the effective date of the new beneficial ownership rules under the Corporate Transparency Act is less than 90 days away, most businesses are either unaware of the reporting obligations they face or uncertain how they will comply.

A survey released Tuesday by Wolters Kluwer polled 669 U.S.-based companies, along with 328 law firms and accounting firms, about their general awareness of and readiness for complying with the CTA's new beneficial ownership rule. While the rule will apply to approximately half (51%) of the firms that participated in the survey, about three-quarters (74%) of those companies for which the CTA rule will be applicable indicated they only became aware of the rule by having taken the survey. Many respondents who are aware of the CTA were unsure (41%) whether the beneficial ownership rule, as implemented by FinCEN, would apply to them, despite their company's reporting status and revenue size.

Starting Jan. 1, 2024, most U.S. corporations, limited liability companies and U.S. operations of foreign companies will be required to report information about their beneficial owners to the Treasury Department's Financial Crimes Enforcement Network, or FinCEN (see story). The requirements were part of the Corporate Transparency Act of 2021 in an effort to crack down on shell companies used for tax evasion and illicit trafficking, and the clock has been ticking on the approaching deadline. Now some are calling for a delay in the imminent requirements.

Andrew Harrer/Bloomberg

The beneficial ownership reporting rules will require companies to collect, document and monitor previously unreported data on a company's primary owners via completion of a Beneficial Ownership Information report. Anyone who owns or manages a limited liability company needs to be aware of the new reporting requirement, first to determine if their company is subject to BOI reporting and, if so, to start preparing to comply.

"Lack of understanding regarding the applicability of beneficial ownership reporting is significant — 41% are 'unsure' among companies we surveyed — as is the lack of awareness about the CTA in general," said George May, vice president and segment leader for small business at CT Corporation, a Wolters Kluwer business, in a statement.

Among those survey respondents who believed the CTA applies to their organization, only 27% anticipate doing their own reporting, with 48% expecting to use third parties to do the reporting, and another 25% are unsure as to their plans. The responses among CPA firms and law firms polled were similar, with only 54% confirming awareness of the CTA before having taken the survey, compared to 46% who were unaware.