LLC’s Subject to New Federal Reporting Law Requirements

Warning!  This is important to know because so many people do business as an LLC.  If your accounant or lawyer has not informed you of this, read on.

Unfortunately, some companies that are not aware of the new law are already in violation!  If you know someone who may have an LLC or other small incorporated business, please forward this link to them.

Under the auspices of the Corporate Transparency Act (CTA), the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN), a bureau charged with fighting money laundering, terrorism financing, and other illicit financial activities is requiring most small business entities operating in the United States to report certain information, beginning January 1, 2024.  This imposition on LLC’s and other businesses (the little people, for the most part) is mandatory and failure to comply will result in hefty fines and even imprisonment.  As stated previously, some companies that are not aware of the new law are already delinquent.

Companies formed in 2024 must report within 90 days of formation and these are the ones who could now be delinquent.  Companies formed before 2024 have until the end of the year to file.  In 2025, companies will only have 30 days from formation to comply.  The information they are after is to identify the people who exercise “substantial control” over a company or who own at least a 25% interest (e.g. stock or LLC membership interests).  There are exemptions to filing such as companies that have 20 or more employees and more than $5 million in gross receipts.  Inactive entities, as defined under the law, are also exempt.  As a special feature for the smallest of small business, the law has onerous rules that require constant monitoring of events that will trigger filing thresholds or changes to information.

Sounds like typical heavy-handed government overreach to me and, in fact, there was a court case against this law in Alabama and, on March 1 of this year, the court found the law to be unconstitutional.  But the relief granted in this case only applied to the plaintiffs, not the entire country, and the government is very likely to appeal the case. However, it may pave the way for further challenges to the CTA.  We can only hope.  But, the law had veto-proof Democrat support when passed by Congress and the Treasury Department is barreling on down the road to enact and enforce the law.

I would advise companies formed in 2024 to go ahead and comply with the law to avoid possible penalties.  Other companies have until the end of the year to file and may want to wait to see what happens on the legal front.

If you want to know more, here is a good article from a law firm:https://www.jdsupra.com/legalnews/corporate-transparency-act-compliance-2968144/

Also, here is a link to the BOI Small Entity Compliance Guide:https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf

Please feel free to contact me at tom.r.richards@gmail.com or 210-777-9900 if you have any questions.