Posted on 12/18/2023 3:45:19 PM PST by Twotone
Have you heard of the Corporate Transparency Act? Most of the estimated 32 million small business owners, including sole proprietors, whom the new law affects have not. It was just recently put on my radar by a handful of people — quite a shock for a measure that takes effect at the start of the new year!
A new reporting rule under the law means that businesses will need to file information with the Financial Crimes Enforcement Network (a bureau within the U.S. Department of Treasury), including personal information about the people who are associated with the business, or risk penalties for noncompliance. This is being done in the name of "fighting money laundering." Sure.
The law is another administrative hassle that adds to small business owners’ paperwork requirements and takes entrepreneurs away from more productive economic activities.
If you are not familiar with FinCEN, its mission is “to safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.”
Of course, the law includes around 20 exemptions, such as publicly traded companies, U.S. operating companies with 20 or more full-time employees and $5 million in sales, and some others, which means that the burden of this rule falls primarily on small businesses, including solopreneurs (aka one-person entities).
While it is not uncommon for unsavory folks to use certain business structures to create shell corporations to launder money, actual instances of this are few and far between. This rule will impact tens of millions of law-abiding small businesses.
FinCEN estimates it will take three hours for initial compliance (but who knows, depending on if you have to track down the information they are asking for or if you have questions). Then you will be responsible for letting FinCEN know of any future updates and changes.
First, this is an unnecessary invasion of privacy for small businesses, creating a database filled with personal information. And it is hard to believe the law will do anything meaningful to stop money laundering or that the burden it generates will justify any possible small benefit to come from it. Not to mention the security risk of having yet another database full of information for cybercriminals and foreign adversaries to target.
Moreover, it is another administrative hassle that adds to small business owners’ paperwork requirements and takes entrepreneurs away from more productive economic activities.
Of course, there is also a fee of $85 to milk from the small businesses already burdened by this compliance — that is, if you understand what you are doing and don’t need to hire some type of adviser to assist you, which will cost you much more.
And, again, very few people even know about the law.
By the way, you can’t blame Joe Biden for this one. “The act falls under the scope of the Anti-Money Laundering Act of 2020 and was enacted as part of an expansive national defense authorization package on Jan. 1, 2021,” the Mississippi Business Journal reported. “The package passed through Congress with broad bipartisan support before being vetoed by then-President Donald J. Trump. Both houses of Congress voted to override the veto.”
As it appears you have a year for initial compliance if you are an existing small business (but only 30 days after creation if you are starting a new one), I am likely to wait until the back half of 2024 to see if the rule gets revised or postponed before I waste any of my valuable time on it.
But in the meantime, if you are a small business owner or service small businesses, put it on your radar and ask your legal and accounting advisers about it.
The government proves once again that it doesn’t care about small businesses but only about what gives government officials more power. Unfortunately, entrepreneurs have to pay the price.
Oh, geesh. Just what I need another form to fill out and more government intrusion. Contacting my reps on this. Nothing will be done, I’m sure.
So happy to be out of business and retired. I still have dreams though they come after me for some obscure non-compliance issue. Same dream as forgetting your last test or showing up at school buck naked.
In the words of Elon, GFY.
“The package passed through Congress with broad bipartisan support before being vetoed by then-President Donald J. Trump. Both houses of Congress voted to override the veto.”
The UniParty in action.
We might as well live in Cold War Europe.
Lots of business already burdened with “OFAC SDN” list checks (i.e. car dealers have to run an OFAC check on all car buyers). Bogus red tape!
https://alessa.com/blog/ofac-screening-requirements-compliance/
The big ones are easier to socialize.
It appears to basically be businesses that are LLCs or corporations.
If you don’t file paperwork with a secretary of state to be a business, and not an LLC or corporation, it doesn’t seem to affect you.
More here:
https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide_FINAL_Sept_508C.pdf
You just mentioned my three nightmares.
Tax issues, forgetting to attend a college final, and somehow forgetting my clothes and winding up in class.
I just got that notice. Lucky me. Only another few days of tax documents I need to fill out for “my own good.”
I’m a solopreneur with an LLC. I met with a new CPA and he’d never heard of this thing. I hope Trump gets in and helps destroy it.
“And if 30 million of the 32 million small businesses don’t comply, simply because they don’t know about it…what are they going to do, arrest 30 million people?”
No. Probably just fines with interest accrued... like the IRS does. And liens against the business owner, forcing compliance and/or bankruptcy.
You can bet that Robinson Walker, LLC; Owasco, LLC; Hudson West III, LLC; Rosemont Seneca Bohai, LLC, and Rosemont Seneca Partners are all exempt from this.
Thanks y’all.
BKMK
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