Company accounts

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I promised to say what I thought should be in small company accounts. I will, over time. One thing was suggested by an article in the Washington Times (of all papers) last week. It reported:

Officials in all 50 states will incorporate nearly 2 million companies this year without identifying the owners - a fact a Senate subcommittee fears could help money launderers, tax evaders or terrorist financiers.

"Although the vast majority of companies formed in the U.S. serve legitimate commercial purposes, they are attractive vehicles for those seeking to launder money, evade taxes or finance terrorism," said Sen. Norm Coleman, Minnesota Republican and chairman of the Senate Homeland Security and Governmental Affairs permanent subcommittee on investigations.

"Without company-ownership information, it is often difficult, and at times impossible, for U.S. law enforcement to identify and prosecute the criminals behind U.S. shell companies that are engaged in illicit activities," Mr. Coleman said.

So let's start with the most basic of information that should be disclosed in a set of small company accounts. There should be listed:

  1. The company name
  2. The company number
  3. The state of incorporation
  4. The registered address of the corporation
  5. The addresses from which it trades or has traded in the year (yes, all of them - after all, this doubles as advertising for legitimate concerns)
  6. The names of the directors of the company who have served in the year
  7. The names of all company secretaries in the year (if one is required)
  8. The names and addresses of all shareholders in the year
  9. If any shareholder, director or company secretary acts as a nominee this must be disclosed and the identity of the person for whom they act must be disclosed
  10. The names, company numbers and states of incorporation of any entities that control the company directly or indirectly, with details given as to how that control is established and who the beneficial owners of those companies are if that information is not available on public record in the same state as that in which the reporting company is located, free of charge
  11. Likewise details of the trustees and beneficiaries of any trusts that directly or indirectly contributes to control of the company.

For a legitimate operation this information should be a matter of no consequence. No one can argue that its disclosure increases the burden on business. In the UK this information would eliminate the need for a separate annual return to Companies House, so cutting the burden of administration.

The only objection to this disclosure can come from those pursuing an illegitimate activity, whether related to tax or trading.

In that case this disclosure seems the most basic first requirement for data to be included in small company accounts, the world over. And it would meet the needs of those enforcing the law the world over. The benefits clearly outweigh the costs. So why isn't it happening?


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