A couple of years ago, Congress found time to agree on a wildly intrusive law designed to prevent tax evasion and other illegality, the Corporate Transparency Act.  All business BELOW a certain size will be required, starting next January 1, to register with the US Treasury’s Financial Crimes Enforcement Network (FinCEN) and to provide detailed information about their companies and beneficial owners, in order to guard against tax scams and criminal activity.  Failure results in fines and jail time.

For starters, this is a law that affects small business; large businesses are exempt if public or if have 20 employees and more than $5M in gross receipts and a US office.  As a practical matter, a large enterprise will have very many owners and they will keep changing ownership.

So, if you are a small business (required to make a government filing to form your entity, such as setting up certain trusts, forming a corporation, forming a limited partnership LLP or forming an LLC), then during 2024 (whether your business was existing at the start of the year or formed thereafter) you must file with your government:

FOR YOUR BUSINESS: name, trade name and dba, address, jurisdiction of formation (if foreign company first site of US registration), and taxpayer ID number.

FOR EACH INDIVIDUAL OWNER: legal name, date of birth, address (usually home), an identifying number from a license or passport or similar document with an image of that document.

There is more if you form an entity after January 1,2024, but this is enough for now.   Better call your CPA for help.   (And, I sure do hope the portal for receiving this information is secure!)

There are all sorts of legal issues we won’t go into here, and numerous loopholes. For example, and this is NOT legal advice (nothing in any post here is ever legal advice) and as there seem to be no regulations, forms and instruction: are individual entrepreneurs exempt, are common law partnerships (unlike limited liability partnerships, they may well not need to file anything to be formed) exempt, will certain “owners” just become consultants or lenders to avoid having to file while in fact contracting to receive substantial financial rewards akin to an equity interest, what if investors form a group to invest which group need not report such as a simple partnership–just to hit a few thoughts that come to mind even from this ethical attorney posting this blog.

At a time when there is pressure to control large companies, at a time when efforts are being made to protect information of individuals, at a time where many in our body politic on both side of the aisle are fearful of government restricting personal liberties, does this regime make sense?  Is this intrusion, or just the gathering of otherwise government-known but dispersed information efficiently, so as to protect the US tax base and thus benefit all the honest taxpayers who will comply with this new law?

Resolution of the questions in these last two paragraphs are above my pay grade. If you have the answers, or have expertise in these areas, please reply to this post; legitimate dialog may be posted back out.