What’s a little known law which is about to impose more reporting requirements on your private out of home company? The answer is FINCEN’s Beneficial Ownership Information filing requirements. FINCEN is a fancy acronym which stands for the US Tresury’s Financial Crimes Enforcement Network. Effective December 31, 2024 most private businesses, including your out of home company, will have to file a FINCEN report with information (e.g. the name, address, drivers license info or passport and a photo or the drivers license or passport) for all individuals who own more than 25% of your private out of home company or excercise substantial control over your out of home company. Public companies are exempt from the rule. Richard Hamlin of the Hamlin|Cody law firm explains some of the details of FINCEN below.
In its infinite wisdom, the U.S. Treasury Department adopted new reporting requirements for small entities. In general, any entity that was formed by registering with a state agency must report extensive information about its “beneficial” owners. That includes most limited liability companies, but the regulation fails our motto, “clarity above all else.”
For example, a homeowners’ association that is incorporated will probably need to report information. An HOA that is not formally incorporated may not need to do so. “Beneficial ownership” is equally unclear. There is a large list of exempt organizations, that probably won’t apply to most people reading this newsletter, but even the exemptions are unclear. The only part of the regulation that is clear is the list of penalties for failure to comply, including fines of up to $500 a day.
A federal district court judge in Alabama ruled that the regulation is unconstitutional. Unfortunately, that ruling applies only to the plaintiff in that suit, members of National Small Business United. The Treasury Department has said it will appeal the decision. In the meantime, entities in existence as of December 31, 2023, must report their information no later than December 31, 2024. Entities formed in 2024 or later must report their information within ninety days of formation.
- Here is a link to the Treasury Department’s list of Frequently Asked Questions
- Here’s another link to the Department’s “Small Entity Compliance Guide”
The Treasury published this in December 2023. This is the version in effect as of August 16, 2024.
If you operate as a limited liability company or as a corporation (including Subchapter S corporations), you probably need to register. If you would like help with the process, let us know.
Billboard Insider’s take: The new rules are outrageous and duplicative. Ownership information gets reported on tax returns. Personal ID info is reported by your bank to the feds every time you open a checking account. Billboard Insider is unaware of an epidemic of terrorism financed by small domestic LLC’s. Write your congressional rep but in the meantime you need to comply with the act to avoid hefty fines.
To receive a free morning newsletter with each day’s Billboard insider articles email info@billboardinsider.com with the word “Subscribe” in the title. Our newsletter is free and we don’t sell our subscriber list.
