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Are Registered Agent Companies Exploiting Their Role with Rising Fees and Scare Tactics?
Many businesses utilize independent companies as their registered agents for service of process. These companies provide a physical address and a point of contact for receiving official documents and legal notices on behalf of the business. While these are critical services, an increasing number of registered agent companies have been exploiting their role by employing scare tactics to impose excessive fees for both routine and recently imposed FinCEN beneficial ownership filings.
FinCEN Beneficial Reporting – and New Scams
The federal Corporate Transparency Act (CTA) requires most business entities to report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). Although a federal court recently ruled the CTA unconstitutional, that holding is only binding on the plaintiffs in that suit; not every entity. As such, businesses should continue to comply with reporting deadlines.
Business owners should beware that scammers have been sending forms that appear to be official but are not. Many of these forms are designed to collect personal information for fraudulent purposes.
Here are some of the tactics being utilized:
Correspondence asking to click on a URL or scan a QR code
These links often lead to fraudulent websites designed to collect sensitive information or charge exorbitant fees for unnecessary services.
Forms referencing “Form 4022” or “Important Compliance Notice”
FinCEN does not have a Form 4022.
Letters requesting payment to FinCEN
FinCEN does not charge a fee to file a beneficial ownership information statement.
Documents referencing a “US Business Regulations Department"
No such government entity exists.
Claims that the FinCEN beneficial ownership filings are extremely complex and require specialized (and expensive) services
Beneficial ownership information filings are not complex and outside assistance is not mandatory for compliance with FinCEN regulations. A simple filing through FinCEN’s online reporting system, which includes the entity information and the owner’s contact information, is all that is required.
Using scare tactics to create a sense of urgency, including warnings of severe penalties or legal issues if the beneficial ownership filings are not handled immediately
For most businesses, these filings need not be handled immediately, and many are not required to file at all. Businesses exempt from filing include, but are not limited to: Entities that have been largely inactive for over a year; sole proprietorships, nonprofit organizations exempt from tax under Section 501(a); entities that are already regulated by federal or state authorities such as banks, investment companies and advisers, and insurance companies; and certain large operating companies.
What is the actual deadline for the new FinCEN filing?
For businesses that are required to file a FinCEN beneficial ownership report, the deadline for businesses created or registered before January 1, 2024 is January 1, 2025. Businesses created or registered on or after January 1, 2024, must file their initial report within 30 days of their formation or registration.
Also, beware of this entity registration hack
You should also beware of new companies that have been hijacking entity registrations. For example, a client of ours received an official-looking letter shortly after we incorporated their LLC, offering to file their required Statement of Information (SOI) with the Secretary of State. The form listed a “service process fee” of $243, with a deadline the following month. This fee is more than ten times the $20 fee for filing an SOI directly with the Secretary of State – a filing that we had already completed as part of our initial incorporation services.
Registered agent businesses often exploit their role by charging excessive fees for services like these. They may exaggerate the complexity of filing requirements, claim their assistance is mandatory for compliance, or bundle unnecessary services to justify higher charges. These tactics create a sense of urgency and fear, pressuring businesses to pay inflated fees without realizing that the actual cost and requirements are much simpler and more affordable.
How Paley & Prehn Can Help You
By staying vigilant and using trusted law firms like Paley & Prehn, PLC for your California business filings, you can protect your business from these deceptive practices. To learn more about the very reasonable registered agent fees we charge at Paley & Prehn (which includes keeping your required filings up to date), contact our office.