The Financial Crimes Enforcement Network (“FinCEN”), a bureau of the U.S. Department of the Treasury, has issued a final rule that will require many small companies, “Reporting Companies,” to register with FinCEN and file a report containing personal information of the company’s senior officers (and others that exert substantial influence over company decisions) and individuals who own at least 25% of the company (“Officers and Owners”). The information will be used to prevent money laundering, tax fraud, and other illicit financial activity in the United States.
Reporting Companies formed before January 1, 2024, have until January 1, 2025, to register and file an initial report. Reporting Companies formed after January 1, 2024 (the “Effective Date” of the rule), must register and file an initial report within 30 calendar days of formation. Importantly, Reporting Companies must file an updated report within 30 calendar days of any change to previously reported information.
Who Must Report?
Reporting Companies include:
• most LPs, LLPs, LLLPs, and
• business trusts.
The rule exempts large companies that:
• employ more than 20 full-time employees (as defined by the Internal Revenue Service) in the United States;
• filed a federal income tax return for the preceding year reporting in excess of $5,000,000 in gross receipts or sales; and
• own or lease a physical office in the United States where they regularly conduct business.
However, a company must file a report within 30 calendar days upon losing an exemption.
Whose Information Is Included in the Report?
In addition to Officers and Owners, Reporting Companies must submit information on the entity itself and “Company Applicants.” A Company Applicant is:
• The individual who directly files the document that creates the entity or who is primarily responsible for directing or controlling the filing.
• Minor children, individuals acting as an agent, employees, future interest holders, and creditors are excluded from the reporting requirement.
• Reporting Companies existing at the time of the Effective Date are not required to identify and report on Company Applicants.
What Must Be Reported?
Reporting Companies must report each Officer, Owner, and Company Applicant’s legal name, current home address, date of birth, unique identification number from a valid passport or driver’s license, and an image of the identification document (e.g., a digital copy). Officers, Owners, and Company Applicants may report their information directly to FinCEN in exchange for a “FinCEN Identifier” which may then be submitted by Reporting Companies in lieu of the required information.
The Reporting Company must also report information about the entity itself, including the entity’s name (including trade names and DBAs), business street address, jurisdiction of formation, and Taxpayer Identification Number.
Are There Penalties?
Willful provision of false information or willful failure to adhere to the reporting requirements may result in penalties up to $500/day for so long as the violation persists, as well as a criminal fine up to $10,000 and/or 2 years of imprisonment.
Disclaimer: This information is made available for educational purposes as well as to give general information and a general understanding of the law, not to provide specific legal advice. This document should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Use of this document does not create an attorney client relationship between you and the publisher. If you have any questions, please contact Shannon Wilde in the Business Law Section; firstname.lastname@example.org.