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The Coming Deluge for Small Business
Small businesses are often hit hardest by regulation, and the latest federal dragnet is no exception. Under a statute aimed at reducing money laundering, millions of small businesses may soon be snared by onerous reporting requirements and fines for noncompliance.
In 2021 Congress enacted the Corporate Transparency Act ( CTA) in a broad effort to tighten money- laundering laws. The CTA assigns the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) with identifying shell companies used for illegal transactions and creating a registry of businesses with less than $ 5 million in annual sales and fewer than 20 employees.

That describes most small businesses in the country. In a Nov. 16 letter to Congressional leaders, 69 groups representing millions of small business owners say neither they nor FinCEN are ready for the law to go live in January 2024.
The required data collection is “beyond anything the Federal government has ever attempted outside of the Tax Code,” the small businesses write. FinCEN is expecting to collect 32 million new reports in 2024, and millions each year thereafter. The legislation requires reporting for all “ beneficial owners,” a term that encompasses not only a business owner but anyone with a more than 25% stake in a company.

Most of these small operators are unaware of the reporting requirements that are coming their way in a couple of months, but their ignorance won’t get them off the hook. The CTA includes stiff fines of up to $10,000 and two years of jail time for failing to comply. In November 2022, the National Small Business Association filed suit in federal court in Alabama on grounds that the law violates state sovereignty and due process. The lawsuit says the statute improperly “compels self-identification of private individuals” who engage in “lawful, federally unregulated commercial and non-commercial activity.”

Creating safeguards against money laundering is worthwhile, but the CTA’s overbearing requirements are likely to create more burden on businesses than the transparency will be worth. The law is meant to root out the shell companies that conceal illicit transactions like money laundering for foreign businesses or terrorist financing. But why would criminals self-report this information?

The small business owners have asked that the statute be delayed for a year so they and their regulator can get their acts together. As it currently stands, the government isn’t ready to handle what they are requesting, and small business owners don’t know what they are supposed to provide. Short of cancelling the whole thing, a time-out is the least the feds can do to avoid a national bureaucratic meltdown.

The feds and business aren’t ready for new reporting rules on Jan. 1.
 
The Coming Deluge for Small Business
Small businesses are often hit hardest by regulation, and the latest federal dragnet is no exception. Under a statute aimed at reducing money laundering, millions of small businesses may soon be snared by onerous reporting requirements and fines for noncompliance.
In 2021 Congress enacted the Corporate Transparency Act ( CTA) in a broad effort to tighten money- laundering laws. The CTA assigns the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) with identifying shell companies used for illegal transactions and creating a registry of businesses with less than $ 5 million in annual sales and fewer than 20 employees.

That describes most small businesses in the country. In a Nov. 16 letter to Congressional leaders, 69 groups representing millions of small business owners say neither they nor FinCEN are ready for the law to go live in January 2024.
The required data collection is “beyond anything the Federal government has ever attempted outside of the Tax Code,” the small businesses write. FinCEN is expecting to collect 32 million new reports in 2024, and millions each year thereafter. The legislation requires reporting for all “ beneficial owners,” a term that encompasses not only a business owner but anyone with a more than 25% stake in a company.

Most of these small operators are unaware of the reporting requirements that are coming their way in a couple of months, but their ignorance won’t get them off the hook. The CTA includes stiff fines of up to $10,000 and two years of jail time for failing to comply. In November 2022, the National Small Business Association filed suit in federal court in Alabama on grounds that the law violates state sovereignty and due process. The lawsuit says the statute improperly “compels self-identification of private individuals” who engage in “lawful, federally unregulated commercial and non-commercial activity.”

Creating safeguards against money laundering is worthwhile, but the CTA’s overbearing requirements are likely to create more burden on businesses than the transparency will be worth. The law is meant to root out the shell companies that conceal illicit transactions like money laundering for foreign businesses or terrorist financing. But why would criminals self-report this information?

The small business owners have asked that the statute be delayed for a year so they and their regulator can get their acts together. As it currently stands, the government isn’t ready to handle what they are requesting, and small business owners don’t know what they are supposed to provide. Short of cancelling the whole thing, a time-out is the least the feds can do to avoid a national bureaucratic meltdown.

The feds and business aren’t ready for new reporting rules on Jan. 1.
I put this in the same box as the EU CRA. Introducing a load of regulations that apply to everyone that only big businesses will be able to easily comply with so big businesses can take all the business. I am sure it is nothing to do with big business paying loads of money to politicians.
 
The Coming Deluge for Small Business
Small businesses are often hit hardest by regulation, and the latest federal dragnet is no exception. Under a statute aimed at reducing money laundering, millions of small businesses may soon be snared by onerous reporting requirements and fines for noncompliance.
In 2021 Congress enacted the Corporate Transparency Act ( CTA) in a broad effort to tighten money- laundering laws. The CTA assigns the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) with identifying shell companies used for illegal transactions and creating a registry of businesses with less than $ 5 million in annual sales and fewer than 20 employees.

That describes most small businesses in the country. In a Nov. 16 letter to Congressional leaders, 69 groups representing millions of small business owners say neither they nor FinCEN are ready for the law to go live in January 2024.
The required data collection is “beyond anything the Federal government has ever attempted outside of the Tax Code,” the small businesses write. FinCEN is expecting to collect 32 million new reports in 2024, and millions each year thereafter. The legislation requires reporting for all “ beneficial owners,” a term that encompasses not only a business owner but anyone with a more than 25% stake in a company.

Most of these small operators are unaware of the reporting requirements that are coming their way in a couple of months, but their ignorance won’t get them off the hook. The CTA includes stiff fines of up to $10,000 and two years of jail time for failing to comply. In November 2022, the National Small Business Association filed suit in federal court in Alabama on grounds that the law violates state sovereignty and due process. The lawsuit says the statute improperly “compels self-identification of private individuals” who engage in “lawful, federally unregulated commercial and non-commercial activity.”

Creating safeguards against money laundering is worthwhile, but the CTA’s overbearing requirements are likely to create more burden on businesses than the transparency will be worth. The law is meant to root out the shell companies that conceal illicit transactions like money laundering for foreign businesses or terrorist financing. But why would criminals self-report this information?

The small business owners have asked that the statute be delayed for a year so they and their regulator can get their acts together. As it currently stands, the government isn’t ready to handle what they are requesting, and small business owners don’t know what they are supposed to provide. Short of cancelling the whole thing, a time-out is the least the feds can do to avoid a national bureaucratic meltdown.

The feds and business aren’t ready for new reporting rules on Jan. 1.
This law sems impossible to enact as intended without a more fully open financial system in place anyways. I mean open enough where self-reporting is not necessary.
 
I put this in the same box as the EU CRA. Introducing a load of regulations that apply to everyone that only big businesses will be able to easily comply with so big businesses can take all the business. I am sure it is nothing to do with big business paying loads of money to politicians.
The problem it is trying to address is that of shell companies that have hidden ownership and are used to hide money. The Trump Organization has 500 different companies within its structure that are used to move money around and obscure transactions. The problem isn't small businesses in general; it is the huge use of shell companies used to hide ownership and money. The paperwork for most businesses won't be much. Those folks who use shell LLCs to mask what they do are the ones that are complaining.
 
The problem it is trying to address is that of shell companies that have hidden ownership and are used to hide money. The Trump Organization has 500 different companies within its structure that are used to move money around and obscure transactions. The problem isn't small businesses in general; it is the huge use of shell companies used to hide ownership and money. The paperwork for most businesses won't be much. Those folks who use shell LLCs to mask what they do are the ones that are complaining.
Are you saying that the quoted "69 groups representing millions of small business" are using shell LLCs to mask criminality?
 
Are you saying that the quoted "69 groups representing millions of small business" are using shell LLCs to mask criminality?
No. The inability to track shell company ownership easily is used by those skirting the law as well as those who are outright criminals. I think clear and open business ownership disclosure is appropriate. Most small businesses have local licenses and ownership is already open and public. Wanting to hide company ownership and corporate relationships is rarely on the up and up.
 

Who does the Corporate Transparency Act affect?​

According to a recent Small Business Administration report, 27,104,006 small businesses were termed “nonemployer firms” and had no employees. The Corporate Transparency Act is designed to improve business activity transparency through the reporting of Beneficial Ownership Information (BOI) and is particularly targeted to these smaller businesses.

Beneficial owners​

A beneficial owner can fall into one of two categories defined as any individual who, directly or indirectly, either:
  1. Exercises substantial control over a reporting company, or
  2. Owns or controls at least 25% of the ownership interests of a reporting company.
Having two categories is designed to close any loopholes and ensure all owners are identified. The key difference is that beneficial ownership is categorized as those with ownership interests reflected through capital and profit interests in the company.

The beneficial owners must report to FinCEN their name, date of birth, address, and unique identifier number from a recognized issuing jurisdiction and a photo of that document. If an individual decides to file their information to FinCEN directly, they may be issued a “FinCEN identifier” which can be provided on a BOI report instead of the required information.


 
27,104,006 small businesses were termed “nonemployer firms” and had no employees.
It seems this is the relevant table:



Now there are definitely some there that I think deserve a good look. The non-employer corporations particularly stand out. Non-employer sole proprietorships are one person working for themselves, right? And that seems to be who are most affected by this law, except perhaps the criminals?
Just to make a completely unrelated point, that struck me as somewhat odd in that report, is what group it refers to like "% of the U.S. population that identify as". They talk about all sorts of features of employers and gives the percent relative to the US population, there is gender, race, immigrant status, veteran status and age. The only one of those that they say "identify as" is...
Spoiler Can you guess? I would never have got it. :
veteran status??
 
The non-employer corporations particularly stand out. Non-employer sole proprietorships are one person working for themselves, right?
I would think so, but it might well also include all the LLCs that are created as shell companies. The question is: should corporate/business ownership be public knowledge?
 
I would think so, but it might well also include all the LLCs that are created as shell companies. The question is: should corporate/business ownership be public knowledge?
Some certainly should. In the UK you can get loads of data from the government (companies house) with a simple search, and people make tools to automatically search it for connections. This allows people to build up complex networks of people involved in these things, and can be powerful in many situations.

Spoiler The sort of thing you can generate :


I think should extend to anyone getting protection from their creditors, any sort of limited company. I THINK that is what we publicise at companies house, and it seems to make sense but it is an enormous privacy issue. If this extends to any any commercial activity, like the EU CRA where a single donation can you responsible for five years of updates and monitoring seems excessive.

Your 27 million non-employer firms is about one for every ten people. If that really is 10% of the population having to put their data on the public web that is not a small thing.
 
Now there are definitely some there that I think deserve a good look. The non-employer corporations particularly stand out. Non-employer sole proprietorships are one person working for themselves, right?

Some certainly should. In the UK you can get loads of data from the government (companies house) with a simple search, and people make tools to automatically search it for connections. This allows people to build up complex networks of people involved in these things, and can be powerful in many situations.

Spoiler The sort of thing you can generate :


I think should extend to anyone getting protection from their creditors, any sort of limited company. I THINK that is what we publicise at companies house, and it seems to make sense but it is an enormous privacy issue. If this extends to any any commercial activity, like the EU CRA where a single donation can you responsible for five years of updates and monitoring seems excessive.

Your 27 million non-employer firms is about one for every ten people. If that really is 10% of the population having to put their data on the public web that is not a small thing.
It is not clear how many of those 27 million are just shell companies. For example every movie gets its own LLC and likely multiple ones and many shell companies are owned by other shell companies in complex chains of ownership. As I said the Trump Organization has over 500 LLCs all of which are essentially owned and controlled by Trump and his family. Those and all those like that may not even be in the SBA counts.

A far higher percentage provides the IRS with much more data every year. I do not think that there are 27 million actual active sole proprietor companies in the US that have a person in charge of some daily operations buying and selling things.
 
It is not clear how many of those 27 million are just shell companies. For example every movie gets its own LLC and likely multiple ones and many shell companies are owned by other shell companies in complex chains of ownership. As I said the Trump Organization has over 500 LLCs all of which are essentially owned and controlled by Trump and his family. Those and all those like that may not even be in the SBA counts.

A far higher percentage provides the IRS with much more data every year. I do not think that there are 27 million actual active sole proprietor companies in the US that have a person in charge of some daily operations buying and selling things.
It seems to be a core bit of data that is missing from that document, it gives a lot of information about the makeup of this group of people, but it does not say how big it is.
 
Yes. In NM we have just over 2 million people and the pre-pandemic data shows that there were ~154,000 small businesses in the state (less than 500 employees). 122,000 were non employer companies (one person). ~28,000 had 2-19 people. Even if you push that 154,000 twenty times larger for NY, CA, etc. you have a hard time getting to 27 million.
 
Yes. In NM we have just over 2 million people and the pre-pandemic data shows that there were ~154,000 small businesses in the state (less than 500 employees). 122,000 were non employer companies (one person). ~28,000 had 2-19 people. Even if you push that 154,000 twenty times larger for NY, CA, etc. you have a hard time getting to 27 million.
I make that pretty close to the national average of non employer companies per capita at 1 in 16 in NM to 1 in 12 in the US, but I may be missing something. It does not answer the question how many people will need to make the PII public. I guess we will find out.

Spoiler Sums :
> 333287557/27000000
[1] 12.34398
> 2000000/122000
[1] 16.39344
 
"It asks for four readily available pieces of information: your name, address, date of birth, and an ID number, which could be a driver’s license or passport number. You disclose that to the Treasury Department."

 
"It asks for four readily available pieces of information: your name, address, date of birth, and an ID number, which could be a driver’s license or passport number. You disclose that to the Treasury Department."

And who does the Treasury Department tell? If that is the public, that is a lot of information.

I have to wonder, what if you do not have a driver’s license or passport number? There must be a lot of people who have neither, some of whom must have a business.
 
And who does the Treasury Department tell? If that is the public, that is a lot of information.

I have to wonder, what if you do not have a driver’s license or passport number? There must be a lot of people who have neither, some of whom must have a business.
US Treasury has limitations on who gets to see their data (aggregated may be an exception). Everyone (citizens) have a ss number; legal immigrants will have a green card or visa number. Non driving citizens/persons can get a state ID card with a number.
 
The Coming Deluge for Small Business
Small businesses are often hit hardest by regulation, and the latest federal dragnet is no exception. Under a statute aimed at reducing money laundering, millions of small businesses may soon be snared by onerous reporting requirements and fines for noncompliance.
In 2021 Congress enacted the Corporate Transparency Act ( CTA) in a broad effort to tighten money- laundering laws. The CTA assigns the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) with identifying shell companies used for illegal transactions and creating a registry of businesses with less than $ 5 million in annual sales and fewer than 20 employees.

That describes most small businesses in the country. In a Nov. 16 letter to Congressional leaders, 69 groups representing millions of small business owners say neither they nor FinCEN are ready for the law to go live in January 2024.
The required data collection is “beyond anything the Federal government has ever attempted outside of the Tax Code,” the small businesses write. FinCEN is expecting to collect 32 million new reports in 2024, and millions each year thereafter. The legislation requires reporting for all “ beneficial owners,” a term that encompasses not only a business owner but anyone with a more than 25% stake in a company.

Most of these small operators are unaware of the reporting requirements that are coming their way in a couple of months, but their ignorance won’t get them off the hook. The CTA includes stiff fines of up to $10,000 and two years of jail time for failing to comply. In November 2022, the National Small Business Association filed suit in federal court in Alabama on grounds that the law violates state sovereignty and due process. The lawsuit says the statute improperly “compels self-identification of private individuals” who engage in “lawful, federally unregulated commercial and non-commercial activity.”

Creating safeguards against money laundering is worthwhile, but the CTA’s overbearing requirements are likely to create more burden on businesses than the transparency will be worth. The law is meant to root out the shell companies that conceal illicit transactions like money laundering for foreign businesses or terrorist financing. But why would criminals self-report this information?

The small business owners have asked that the statute be delayed for a year so they and their regulator can get their acts together. As it currently stands, the government isn’t ready to handle what they are requesting, and small business owners don’t know what they are supposed to provide. Short of cancelling the whole thing, a time-out is the least the feds can do to avoid a national bureaucratic meltdown.

The feds and business aren’t ready for new reporting rules on Jan. 1.
I'd bet after-the-fact fines are part of the goal. Reads like a standard fleecing. The mob doesn't really care if it hurts those it's protect'n.
 
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