Our federal government has done it again. They have created more unnecessary regulations to make it difficult for the small business owner and allow the bureaucracy to track your finances.
As of last January 1st , 2024, your small business operating in the United States, which includes foreign and domestic entities (LLCs, S-corps, Corporations) must consider when to file the “Beneficial Ownership Information” (BOI) reports with the Financial Crimes Enforcement Network (also known as FinCEN). This was passed into law as the Corporate Transparency Act (CTA) by Congress and the Senate. This is a major shift in how the federal government wants to track beneficial ownership of “reporting companies.”
The official government press release states it is a “simple form” to fill out, yet it takes three hours to complete and a 50 page guide book to explain how to do it. Remember how difficult it is just to fill out your federal taxes? The IRS also has a guide book, and you also need to pay expensive service fees to accountants to figure out how to file your taxes.
What is the purpose of this extra burden on business owners? We are told it is for our own good. FinCEN has stated they want to catch more money laundering, tax fraud, and other fraudulent activities from business entities. Yet if a corporation makes larger than $5,000,000 and has over 20 employees, they could be exempt (meeting all the requirements). However, the working mom that has a side hustle on Etsy that made $10,000 last year as an LLC could be fined or even jailed if she does not fill out the paperwork correctly.
How much is the fine you might ask? Civil penalties are $500 per day and up to a total of $10,000. Wait there is more! You could go to jail for non-compliance. Criminal penalties are up to two years of imprisonment.
There are 23 exemptions to the CAT, and guess who does not need to comply? Banks, broker-dealers, investment advisers, and some qualifying big corporations as I mentioned earlier. Does something smell fishy, or is it just me? Why does Hunter Biden get away with money laundering, which was well over $5 million, yet the small struggling business owner has to bow down to extra scrutiny with an invasion of privacy. Is this another push for Digital IDs in order to become more like the Chinese Communist Party’s surveillance on citizens?
Here are the timelines. If you are an existing business before January 1st , 2024 you have a full year to comply by January 1st , 2025. If you start a new business entity after January 1st , 2024 you have 90 days to fill out the paper work and comply.
Do you need to call a lawyer a figure out this regulation? Maybe. Why not call your State Representative first and get this Corporate Transparency Act repealed. We can be a louder voice when we are stronger in numbers. Share this newsletter with a fellow ecommerce business owner or any business owner that has internet presence. They may thank you later for bringing this to their attention.
Quick reference to contact your representatives:
How a new Government Rule will Crush Small Businesses
Groundbreaking US Corporate Transparency Act Takes Affect January 1
Financial Crimes Enforcement Network (FinCEN)