Potential $10,000 Penalties per Entity – End of Year New Reporting Requirements

[Sean O'Keefe]

Starting January 1, 2024, the Corporate Transparency Act requires all US-based entities to report to the Financial Crimes Enforcement Network (FinCEN). These reports will need to include information about the entity and its key stakeholders. These stakeholders are referred to as “beneficial owners” in the guidance.

Any business with any legal entity (including single member LLC’s with little activity) will be included in these requirements. Small businesses need to take action and most likely are NOT exempt from these requirements.

All businesses need to take the time now to understand what the reporting guidelines will require from them, the reporting deadlines, and how to avoid penalties associated with failing to file the required reports.

Here is what you need to know:

• For entities in existence prior to January 1, 2024, initial reports must be filed by December 31, 2024.
• For new entities that are created on or after January 1, 2024, initial reports must be filed within 30 days of formation. FinCen is proposing to allow entities formed in 2024 90 days to file their initial report, but beginning in 2025, the 30-day initial report deadline would resume.
• A reporting company must file an updated report within 30 calendar days after any change occurs to previously submitted information concerning the company or its beneficial owners.
• FinCEN states that the requirement to update reports is triggered when there is “any change with respect to required information previously submitted to FinCEN concerning a reporting company or its beneficial owners.”

It is important to remember this going forward:

• Failure to timely file your report carries penalties of up to $500 per day, up to $10,000 per entity.
• Small business are among the least likely to be covered by an exemption to filing this report.
• The CTA is written with the intention of gaining information about small entities could have unknown foreign investments or are engaging in money laundering activities.

Here is a link the FinCEN homepage: https://www.fincen.gov/boi

Here is a link to the FAQ from FinCEN:  https://www.fincen.gov/boi-faqs.

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*This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.