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Planning To Start A New Company in Next Six Months? / Sooner Might Be Better / Heads-Up on Fast-Approaching “Beneficial Ownership” Reporting Burden

November 7, 2023 /

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You may already know this, but, just to be sure, you can get yourself a delay in your reporting burden if you are at least aware of this………..

The Treasury Department’s new FinCEN “Beneficial Ownership Information” (BOI) reporting requirement takes effect as of January 1, 2024, just over seven weeks away. (31 CFR sect. 1010.380, implementing sect. 6403 of the Corporate Transparency Act of 2020.)

BUT, if your company was created in 2023 or earlier, any filing requirement for such entity is automatically put off until January 1, 2025. New entities created in 2024 or after MUST submit a report within 30 days of creation. If you are planning to set up a new company any time soon, and all other things being equal, you might find it a blessing to set it up this month or next.

Bear in mind that this applies both to small businesses and large.

I suspect we are going to see a lot of clarification over what needs to be reported once FinCEN, beginning in 2024, is hit with a deluge of objections, lawsuits, and requests for clarification on just how this rather intrusive bit of self-reporting is to be applied. Also bear in mind that personal liability, both civil and criminal, arises in connection with these reports.

Plus, as I suspect you already know, if the reports reveal involvement of foreign nationals (remember, “beneficial” goes way beyond names already showing up on traditional corporate or LLC filings and reporting), then a prior, existing compliance mandate may need to be considered. Those prior mandates already pose many liability questions for officers and directors. So, potentially, there is some possibility of a double whammy in this.

I am alerting those among my friends and clients who I know to be active in forming new ventures. It may pay to consider setting up that new company now, before this year ends, if it is just a question of putting things off until after the holidays. Official clarifications on this kind of disclosure can sometimes save a lot of headaches.

Also, don’t count on getting an exemption—-those can be more complicated than business people fully appreciate. Under the coming rule, guessing wrong on an exemption can be a basis for liability all by itself.

If you want to read something about this that will give you a quick overview, let me know. More than happy to pass along the more-readable FinCEN materials on this coming reporting burden.

Jules

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Jules G. Radcliff

RADCLIFF FAIRMAN LLP

515 S. Flower St., 18th Floor

Los Angeles, California 90071

Direct: (213) 999-9702

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