I wrote about this the first time back in 2019 and then again last December.
And, I’m writing about it now because the final rules will be issued very shortly.
So, if you own (or will be starting) an LLC (limited liability corporation), a corporation, an LLP (limited liability partnership), partnership, or a business trust, it’s time to be prepared.
Last year, I explained that the Corporate Transparency Act (which passed in 2021), which affected the above entities, would require registration and private information to be shared with the Financial Crimes Enforcement Network (FinCEN, a part of the Treasury Department).
The purpose of the law is to prevent money laundering, terrorist financing, corruption, and/or tax fraud- or any other concept that anonymous shell companies employ in the USA. (Think how easy it would have been to go after the Russian Oligarchs as part of the Ukraine sanctions had this already been operational.)
With a penalty of $ 500 a day (maximum of $10K) and 2 years of imprisonment, “beneficial owners” will be reporting to FinCEN the details of each beneficial owner’s (someone who owns 25% or more of an entity or exercises control over the company) full legal name, date of birth, residential address (no Post Office Boxes), and an identifying number (Driver’s license or passport number). (This database is not publicly accessible- it is theoretically only for intelligence agencies, national security, law enforcement, and those who enforce anti-money laundering activities.)
No longer going to use the SSN or FEIN; instead a driver’s license or passport number will be used.Although the law was written last year, it wasn’t to take effect until right about now to ensure the regulations would be complete and air-tight. (The proposed rule was published on 7 December 2021. Treasury Secretary Yellen announced in April that the second version of the regs would appear shortly.)
So, every new entity will have 14 days to ensure compliance (from the date of formation), while existing entities will have 1 year to ensure compliance. That’s about 30 million entities. Only those entities with more than 20 full time employees AND $ 5 million in gross receipts would be exempt.
Are you ready?
