Are You Ready to Report Your LLC (or any other entity) to Uncle Sam?

In an effort to crack down on money laundering and other illegal activities Congress passed the Corporate Transparency Act into law effective January 1, 2021.  We finally got Proposed Regulations from the Financial Crimes Enforcement Network (FinCen) on December 7.

It is likely that you will need to report all of your current business entities to the government in the near future.  The Regulations indicate that for any current entity you will need to report each entity within one year of the final regulations (likely later this year).  Any new entities have to file within 14 days of formation.

Here, in brief, is what you need to know:

• What entities are required to report information on Beneficial Owners – Entities required to report this information include limited liability companies, limited liability partnerships, limited liability limited partnerships, business trusts, corporations, and most limited partnerships.  Essentially any entity that is required to file with an applicable secretary of state or similar agency will have to file.
• What is a Beneficial Owner – Any individual who directly or indirectly controls at least 25% of the entity.  There are three indicators of control (1) service as a senior officer, (2) authority over the appointment or removal of any senior officer or board of directors or similar, and (3) direction, determination, or decision of or substantial influence over important matters of the company.
• What information must be reported – For each Beneficial Owner, you must report:
  • Full legal name,
  • Date of birth,
  • Current address, and
  • A unique identification number (social security number or federal identification number, etc.).
• Are certain entities excluded – Yes, however for most farm operations, the only one that would apply is if you are considered to be a large operating company defined as:
  • Filed a previous year federal income tax return showing at least $5 million in gross receipts,
  • Employs more than 20 employees on a full-time basis in the US, and
  • Has a physical presence in the US.
• What must it report about the company – It must report the following:
  • Its name,
  • Any alternative name it may use (dba, etc.),
  • Its business address,
  • Its jurisdiction of formation or registration, and
  • A unique identification number (either a TIN or an EIN).
• What is the penalty for not reporting – Can be fined up to $500 civil penalty per DAY for not reporting or may be fined up to $10,000 and imprisoned for up to two years for a criminal violation.

The bottom line is get ready to provide this information.  Any new entity will be required to provide this information within 14 days after creation.  As shown, the penalties can be harsh for not filing.