Welcome back.
Today, I'm going to talk about a new reporting requirement
that is imperative for you to know that starts in 2024.
So we have a less than a year to prepare for this.
And you should be thinking about this on any new investments businesses
that you have going forward, because it's going to create
quite a compliance burden for a lot of people.
So this is a new FinCEN requirement for certain legal entities
and reporting on its better official owners or owners of the business.
First of all, let's talk about what FinCEN is.
Benson is the Financial Crimes Enforcement Network, which is essentially
a part of the US Treasury and was created in order
to fight against money laundering and terrorism financing.
Among other things.
FinCEN has been around for a long time and has had a lot
of reporting requirements that are already in existence.
For example, there are a lot of reporting obligations
for banks for like suspicious deposits
or any deposits of amounts or transactions over $10,000.
There's also requirements for us citizens and residents
to report any financial accounts that are held outside the U.S.
So there's already a lot of reporting, but now there expand it
to include certain legal entities and reporting on its owner.
So starting in 2024, El
Al sees as well as corporations
and any entity that is created by filing
with the secretary of state or similar entity in a state
is going to be required to file a report of beneficial ownership.
This form ROL require LLC to report certain information
in on its beneficial owners, which are those that own either
directly or indirectly, 25% or more of the business,
or anyone that essentially exercises control over the entity.
So notice how I said directly or indirectly,
that means if you own an LLC and even though you don't directly
own it in your name, if you own it through another type of entity,
say another LLC and you have an LLC underneath it.
But you when you go through the ownership, you effectively own at least 25%.
Well then you're
going to be one of the beneficial owners that are required to be reported.
Also, when you exercise control, that could essentially be a manager
or anyone that can make decisions on behalf of the entity
or open bank accounts for it, anything like that.
Even if that person that exercises control doesn't have 25%
or more ownership, they will be required to be reported to on this form.
The type of information that they're going to require on the form
is the name of the owner's social securities of the owner's
date of birth addresses, the date the individual became an owner
and the ownership percentage in the entity.
So quite a bit of information.
Now, there are two different deadlines depending on when an entity is created.
If an entity was created or in existence before January 1st of 20, 24,
then they will have until January 1st of 2025 to file the initial report
for any entities created after January 1st, 2024,
They'll have 30 calendar days to file the initial report.
Now, you're also required if you make a change to the LLC
or other reportable entity, you're required to file updated reports.
So every time you have a change that would alter the report
that's on file, you'll have to report that change within 30 calendar days.
Also Now, as you can imagine, if you have a lot of LLC,
so if you set up a different LLC for every investment that you have,
every real estate venture or maybe every partnership that you're
in, well, that could be a pretty hefty burden for a lot of people.
And not only is that a hefty burden in terms of compliance and filing,
but they're also heavy penalties for not complying with this.
So they start at $500 a day that it's late
and go up to $10,000 maximum.
Now, that's for civil penalties.
If someone willfully does not file, then those penalties could be higher.
So the cost of not doing this is going to be pretty high.
So you want to start making sure that you are keeping
track of this pretty soon so you don't miss these filing obligations.
Like I said earlier, this doesn't just apply to LLC,
but it also applies to corporations and any other type of entity
that is created by filing with the Secretary of state.
So this can oftentimes include general partnerships, limited partnerships,
limited liability partnerships, pretty much most entities.
So if you have any type of legal entity, you'll definitely want to look into
whether you have to file these reports to make sure they'll be considered.
These requirements will be one more burden for small businesses, but it's something
that you should not just forget about and definitely want to take care of.