Part of the newly passed National Defense Authorization Act, known as the Corporate Transparency Act, includes a ban on anonymous shell companies in the United States. Historically, the U.S. has been one of the top countries for criminals seeking financial secrecy and hiding large amounts of money. This new law attempts to close loopholes and prevent this criminal activity.
The bill, found here https://www.congress.gov/bill/116th-congress/house-bill/2513/text , requires newly forming corporations or LLCs to provide the following information:
(a) Reporting Requirements.—
“(1) BENEFICIAL OWNERSHIP REPORTING.—
“(A) IN GENERAL.—Each applicant to form a corporation or limited liability company under the laws of a State or Indian Tribe shall file a report with FinCEN containing a list of the beneficial owners of the corporation or limited liability company that—
“(i) except as provided in paragraphs (3) and (4), and subject to paragraph (2), identifies each beneficial owner by—
“(I) full legal name;
“(II) date of birth;
“(III) current residential or business street address; and
“(IV) a unique identifying number from a non-expired passport issued by the United States, a non-expired personal identification card, or a non-expired driver’s license issued by a State; and
“(ii) if the applicant is not a beneficial owner, also provides the identification information described in clause (i) relating to such applicant.
“(B) UPDATED INFORMATION.—Each corporation or limited liability company formed under the laws of a State or Indian Tribe shall—
“(i) submit to FinCEN an annual filing containing a list of—
“(I) the current beneficial owners of the corporation or limited liability company and the information described in subparagraph (A) for each such beneficial owner; and
“(II) any changes in the beneficial owners of the corporation or limited liability company during the previous year; and
“(ii) pursuant to any rule issued by the Secretary of the Treasury under subparagraph (C), update the list of the beneficial owners of the corporation or limited liability company within the time period prescribed by such rule.
There will be a few exceptions to this requirement, such as large companies with more than 20 employees, revenues over $5 million and a physical presence in the U.S. and non-profit organizations.
By increasing the transparency of these entities, lawmakers hope to make it more difficult to launder money or evade taxes. Those who do not comply with the new rules or who deliberately supply false information will face criminal prosecution, including potential jail time.
Additional guidance will be forthcoming and may likely apply retroactively to January 1, 2021. We will keep you updated as more information is disclosed.
Be sure to obtain advice from a qualified professional for any questions or assistance. This is general information and should not be relied on.
Jill A. Helm, CPA