The Corporate Transparency Act (CTA) is a classic example of intrusive big-government overreach. It places a new compliance burden on main street Americans with an LLC, and failure to comply comes with criminal penalties that could land you behind bars.
The CTA requires individuals with “substantial control” over a company or an equity position of 25 percent or greater to disclose personal data with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) – a government bureau most Americans have never heard of before.
The CTA will impact small businesses across the nation in addition to millions of citizens who use LLCs to invest in real estate or to protect their assets. Over 32 million business entities are estimated to be affected by the law.
Americans with a CTA filing obligation must report their name, date of birth, address, and a scan of their government-issued photo ID to the Treasury Department. Any time this information changes, updated information must be submitted to FinCEN’s database within thirty days.
Failure to file with FinCEN could lead to a criminal penalty of up to two years of jail time and civil fines of up to $10,000 per violation.
Why does the federal government need this information in the first place? The goal of the CTA was to crack down on shell companies used to commit crimes. The reality is lawbreakers are not going to file with FinCEN. Instead, the law will place a massive administrative burden on millions of hard working American business owners.
The legislation was championed by Oregon Senator Ron Wyden and former Representative Carolyn Maloney of New York and slipped into the Fiscal Year 2021 National Defense Authorization Act. After a veto by then President Trump and a subsequent congressional override vote, the bill became law on January 1, 2021, and it went into effect this year.