A new federal law went into effect as of January 1, 2024 that makes it harder for companies to hide their true owners. The Corporate Transparency Act requires nearly all companies in the U.S. to report their “beneficial owners” to the government. The aim of the law is to deter illegal activity by making company ownership more transparent. Supporters say it marks a major step toward stronger corporate accountability.
What Are Beneficial Owners?
Beneficial owners are the real people who actually own or control a company, even if their names don’t appear on company documents. In the past, people have used shell companies to cover up illegal business deals or avoid taxes. This law aims to crack down on these secret owners.
Companies Must Now Disclose Owners’ Names
The law forces companies to disclose the personal names and addresses of their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). FinCEN is a part of the Treasury Department. Law enforcement can request access to the ownership information when needed for investigations.
Some Exempt Companies
Certain companies are exempt from reporting under the new rules. This includes publicly-traded companies, non-profits, religious organizations, and some small local businesses.
Penalties for Noncompliance
Companies that ignore the disclosure rules could face fines up to $500 per day. Willful failure to comply can result in criminal penalties including prison time.
Objections About the Act
Objections to this new act include infringement on privacy rights, and exposure to security risks, such as easier for hackers to access information, without the intended effectiveness. Critics argue that criminals will still find ways to exploit loopholes.
Regardless of whether you support or have concerns about this new law, if you have business ownership, it is important to become familiar with it and be sure that you are in compliance.
FInCen provides a small entity compliance guide which you can access by clicking here.
