In a significant move, the U.S. government has mandated millions of businesses to file new corporate transparency reports starting in 2024 in an effort to “combat financial crimes such as money laundering.” This requirement is part of the Corporate Transparency Act, which was enacted as a component of the Anti-Money Laundering Act of 2020.
The stated purpose of these reports is to provide detailed information about the beneficial owners and applicants of companies. The data required includes the full legal name, date of birth, residential street address, and unique identifying number of each individual owner. By making this information readily available, the Act “aims to prevent the misuse of corporations and other entities for illicit purposes.”
These reports must be filed with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department. However, it’s important to note that the Act does not apply universally. Certain types of businesses are exempt from this reporting requirement. These include publicly traded companies, banks, credit unions, and accounting firms. The intention behind these exemptions is to avoid unnecessary duplication of information already reported to federal regulators. The Act imposes additional administrative burdens on small businesses. Complying with the reporting rule may require time, effort, and resources that smaller companies might find challenging to spare.
Businesses should be aware that non-compliance with these reporting requirements can lead to significant consequences. Failing to comply can result in hefty fines and even imprisonment. Therefore, it’s crucial for businesses to familiarize themselves with these new requirements and ensure they are prepared to meet them. Because there is a limited time to file these reports, businesses should start preparing for these new reporting requirements to ensure they stay compliant and avoid any potential penalties.
As Temecula business owners, it’s crucial to understand these changes and prepare accordingly. For further guidance or assistance, it is recommended that small business owners reach out to legal professionals well-versed in these new regulations.
Stephen Lindsley is a business attorney who’s represented small businesses in the Temecula Valley for over 30 years. He can be reached at 951-296-1698, or by email at: salindsley@lindsleylegal.com. Or visit his website at www.lindsleylegal.com