Hold Off On Your Beneficial Ownership Information – For Now

For the past year, we’ve been working with small businesses to ensure they comply with the Corporate Transparency Act to file their Beneficial Ownership Information before the deadline.

For now, those plans can be put on hold as the courts ruled the entire act overstepped the authority of Congress and states’ rights.

“First, it represents a Federal attempt to monitor companies created under state law—a matter our federalist system has left almost exclusively to the several States. Second, the CTA ends a feature of corporate formation as designed by various States—anonymity,” the judge wrote in his ruling.

Already, most businesses in Florida had an extension to file because of the recent hurricanes, but now, we’re looking at pausing any activity related to Beneficial Ownership Information for the time being.

We discussed much of this previously, but here is a recap of the issue.

What is the Beneficial Ownership Information?

As a recap of the issue, privately owned small businesses, for the most part, do not have to file any sort of public disclosures in the way that companies listed on a stock exchange must do every quarter.

Unfortunately, too many criminals are using fake companies for money laundering and other crimes. It is very difficult to track criminal activity without a subpoena.

That is why, in 2021, the federal government passed the Corporate Transparency Act, hoping to provide more tools for law enforcement to find terrorists, money laundering, counterfeiting and more.

Yes, just like how we take off our shoes at the airport because of an act of terrorism, law-abiding small businesses will now have to file additional information with the government because of criminals.

The law applies to small businesses with fewer than 20 employees and annual revenues of less than $5 million, with some exemptions. That covered more than 35 million businesses!

The penalties for not filing were harsh. According to the federal government:

“The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required BOI report may be held accountable for that failure.”

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