Heads Up! Something New Every U.S. Entity Must File.
I recently discovered a federal requirement for all U.S. business entities that submit formation documents to a state’s Secretary of State office (or equivalent government agency). This is pretty much every type of entity doing business in every state -- corporations, LLCs, LLPs, and other entities, including talents’ loan-outs. It doesn’t matter the entity’s size, or what they do.
Every U.S. entity needs to now submit a report to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The report discloses detailed information about the entity’s “beneficial owners.”
The purpose of this form is to aid the federal government's initiatives against money laundering and tax evasion, aiming to uncover hidden funds beyond shell companies. (The government threw a very large net on this one).
I’m writing this blog because the federal government claims that FinCEN “is engaged in a robust outreach and educational program to raise awareness of and help companies understand the new reporting requirements”.
I daily review a lot of law-related feeds and other data. I was unaware of this outreach or this reporting requirement. I've spoken with many of my colleagues and clients, and they too had no idea this existed.
Filing this form can’t be ignored. For entities in existence before January 1, 2024, the report must be filed no later than January 1, 2025. For entities created or registered on or after January 1, 2024, and before January 1, 2025, the report must be filed within 90 calendar days after receiving notice of the entity’s creation or registration from the applicable state agency.
It's an understatement to say the penalties for failing to do so are draconian. Failure to timely file the report and timely update any changes to it can lead to fines of up to $500 per day until rectified, or in case of criminal charges, fines of up to $10,000 and/or a two-year prison sentence. These penalties apply to the beneficial owner, the entity, and/or the individual submitting the report.
About the only good news about this is that there’s no filing fee to file the report.
Detailed information about these filings are at https://www.fincen.gov/boi. FAQs about them are at www.fincen.gov/boi-faqs.
Yeah, it’s somewhat involved. You should speak with your lawyer for assistance in preparing and submitting these reports.
Don't put this off. While there's no way to know how likely it would be for the Treasury Department to find you if you were out of compliance, it's a totally unnecessary risk. You should have this report filed without delay.
Just Sayin’ ™
(c) 2024 Paul I. Menes