The Corporate Transparency Act (CTA), which took effect this year, has sparked considerable debate over its impact on small businesses and entrepreneurs, particularly those who manage their affairs through LLCs. The law mandates that individuals with “substantial control” over a company or those holding at least a 25 percent equity stake disclose personal information to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
Critics argue that the CTA represents an overreach by the federal government, imposing hefty compliance burdens on small business owners, with severe penalties for non-compliance. Failure to meet the reporting requirements could result in criminal penalties of up to two years in prison and civil fines of up to $10,000 per violation. This has raised concerns about the potential for misuse by enforcement agencies and the disproportionate impact on smaller entities, which unlike large corporations with significant lobbying power, do not benefit from exemptions in the legislation.
The law, championed by Oregon Senator Ron Wyden and former Representative Carolyn Maloney of New York, was included in the Fiscal Year 2021 National Defense Authorization Act. It became law on January 1, 2021, following a presidential veto override. Since then, the introduction of the Repealing Big Brother Overreach Act seeks to overturn the CTA, a movement spearheaded by Congressman Warren Davidson of Ohio, reflecting the growing discontent among small business communities.
As the January 1, 2025, deadline for existing businesses to comply looms, the lack of awareness and preparedness among small business owners and solopreneurs could lead to widespread non-compliance, inadvertently criminalizing a segment of the economy least equipped to shoulder additional administrative burdens. This unfolding scenario underscores the tensions between regulatory objectives aimed at enhancing transparency and the practical realities faced by those on Main Street.
I just had to pay to update my LLCs to comply with this shambolic law that does absolutely zilch…except, of course, threaten to fine me 500 bucks a day IF I don’t comply. Our government and law makers at work…wasting their time while making it that much harder on small business for no valid reason except to shake us down…
