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A new invasive compliance rule has gone into effect in 2024. The catch is that it primarily targets the nation’s small businesses and almost nobody is aware of it.
This abomination is a rule of the Corporate Transparency Act. It seeks to collect “Beneficial Ownership Information” on those who not only own but exert “control” over primarily small business entities.
This information includes both business and personal information like name, address, identifying numbers from documents like a driver’s license or U.S. passport, doing business as (d/b/a) names for the business, and more, through a U.S. Treasury bureau called FinCEN (the Financial Crimes Enforcement Network).
However, this rule is exempting more than 20 types of business entities, including publicly traded companies and U.S. operating companies with 20 or more full-time employees and $5 million in sales, among others.
All small business owners that have entities associated with their business, which includes any one-person businesses using structures like single-member LLCs, S-corps or otherwise, that don’t meet the exemptions are required to report. This is estimated to impact tens of millions of small businesses.
The stated purpose of FinCEN is to fight financial crimes, such as money laundering. Thinking that they are going after the small business owners in the name of money laundering is the same as believing that the government wanted to hire more than 80,000 IRS personnel to go after “billionaires.” It’s not even a credible cover story.
There are other financial-crime fighting tools in place for FinCEN, such as suspicious activity reports. But, in the case of the more than 150 suspicious activity reports that were flagged associated with Hunter Biden and other Biden family members and associates, those went largely ignored.
It seems that all animals, as well as all business entities, are equal, but some are more equal than others.
Of course, this mass data collection program threatens the rights of small business owners, including their privacy and security.
Moreover, it is another instance of the nickel-and-diming of the small business community. It is estimated that it will cost $85 to prepare and submit your compliance form, and but that doesn’t seem to account for any additional help that a small business owner may require from professionals in order to make sure they report and file correctly.
The burdens also mean hours taken away from productive work to focus on this, as well as the requirement of keeping FinCEN updated if any of your reported information changes (for example, you move your business’ location or you get married and change your name). If you don’t, Baker Tilly reports that you can incur civil penalties of up to $500 a day and criminal penalties of up to $10,000 and two years in jail.
How does this help the backbone of America thrive?
It doesn’t. It’s a money-transferring, privacy-trashing scheme that targets the nation’s entrepreneurs who make up almost half of the economy.
This rule, which very few small businesses have even heard about, went into effect Jan. 1, 2024. If you create a new small business with a formal entity attached, you have just 30 days to comply. If you are an existing business, you have all year to file, so I am personally going to wait for my own small business until the second half of the year and try to fight this in the meantime. Please join the fight by calling your representatives immediately and asking them to repeal the Beneficial Owner Information rule via FinCEN of the Corporate Transparency Act and tell them it is anti-small business.
And you can’t blame President Biden for this – or President Trump either. According to the Mississippi Business Journal, “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 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.”
You have Congress to blame, and they should be the ones to fix it.
So, please, spread the word and let’s try to get this rights-crushing, terrible rule repealed. I recently included it on a Statement for the Record for a House Small Business Committee meeting, so it is on their radar, but we need more action to stop this.
The government picks winners and losers and small businesses always pay the price. Help protect the backbone of America and the rights for privacy, security and entrepreneurship.