The Treasury Department has finalized a rule that will require millions of small businesses to report ownership information to the government. The rule, which is part of the Corporate Transparency Act, is designed to help law enforcement track down criminals and terrorists who use anonymous business entities to hide their activities.
The rule will apply to businesses with fewer than 20 employees and less than $5 million in annual revenue. Businesses that are already regulated by the government, such as banks and financial institutions, are exempt from the rule.
Businesses will be required to report the following information about their beneficial owners:
Name
Date of birth
Social security number or taxpayer identification number
Residential address
The information will be collected by the Financial Crimes Enforcement Network (FinCEN), a Treasury Department agency that is responsible for combating financial crimes. FinCEN will make the information available to law enforcement agencies upon request.
The rule will go into effect on January 1, 2024. Businesses that fail to comply with the rule could face civil penalties of up to $25,000 per day.
Proponents of the rule say that it will help law enforcement track down criminals and terrorists who use anonymous business entities to hide their activities. They also say that the rule will help to level the playing field for businesses that are already required to disclose their ownership information.
Opponents of the rule say that it is an unnecessary burden on small businesses. They also say that the rule will discourage people from starting new businesses.
The new rule is a significant change for small businesses. Businesses should start preparing now to comply with the rule.
Here are some tips for small businesses that are required to comply with the new rule:
Identify your beneficial owners. The first step is to identify who your beneficial owners are. A beneficial owner is an individual who has a significant ownership interest in a business or who controls the business.
Gather the required information. Once you have identified your beneficial owners, you will need to gather the required information. This information includes the name, date of birth, social security number or taxpayer identification number, and residential address of each beneficial owner.
File the report with FinCEN. Once you have gathered the required information, you will need to file a report with FinCEN. You can file the report online (Form W-8BEN-E (Rev. October 2021) (irs.gov)) or by mail.
The new rule is a significant change for small businesses. However, by following these tips, businesses can ensure that they are in compliance with the rule.
