The Corporate Transparency Act requires LLCs, Corporations and other business entities to provide Beneficial Ownership Information to the U.S. Treasury Department. Companies failing to do so face stiff penalties.
The new federal regulation threatens small businesses with $500 a day in fines for non-compliance.
The National Federation of Independent Businesses (NFIB) claims the law targets small businesses since publicly traded companies, non-profits and some other large companies remain exempt.
For example, large companies with 20 or more full-time U.S. employees, a physical office in the U.S. and more than $5 million in sales annually need not comply.
“This Act singles out small business owners and subjects them to civil and criminal penalties for simple paperwork violations,” says NFIB Vice President of Federal Government Relations Jeff Brabant.
The regulation requires businesses to provide name, date of birth, passport or driver’s license number and a photo of that document for all owners, Verify reports.
Businesses established prior to January 1, 2024, must file by Jan 1, 2025, wrote Nellie Akalp, founder and CEO
at CorpNet.com in an email to customers.
The California-based company helps small businesses file necessary paperwork for LCC, Corporate or other legal business status.
However, businesses created after January 1, 2024 have just 30 days to file their information, Akalp says. In a May 17, 2024 email to customers, Akalp offered her company’s services businesses comply with the new regulations.
Federal authorities claim the new small business database will limit money laundering through shell corporations. However, Brabant complains it also creates burdensome regulation.
“It also allows state, federal, and international law enforcement nearly unfettered access to a database containing the private and sometimes confidential information of millions of small business owners,” Brabant said.
Still, the future of the new regulation and the act that created it remain uncertain. For example, a U.S. District Judge ruled the act unconstitutional in March, the Associated Press reports.
Now legislators seek to pass a bill to repeal the act permanently. U.S. Representative Warren Davidson (OH-08) and U.S. Senator Tommy Tuberville (AL) lead the effort.
Image: Depositphotos
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