New Year, New Rules
Is Your Business in Compliance?
While we’re toasting to an abundant new year and making our resolutions to eat better, work out more, and finish the projects we start, we can’t forget that the beginning of new year often brings new rules and requirements for how we do business. This year, a new law encouraging transparency in small business ownership is taking effect.
Photo Credit: Caitlin Childs
On January 1, 2024, the Corporate Transparency Act (CTA) went into effect, requiring all small businesses to disclose all the beneficial owners in said company. Originally enacted in 2021, the law “aims to combat illicit activity including tax fraud, money laundering, and financing for terrorism by capturing more ownership information for specific U.S. businesses operating in or accessing the country’s market”[1]. The new legislation requires that businesses submit a report called the “Beneficial Ownership Information Report (BIO) to the Financial Crimes Enforcement Network (FinCEN), which is a crime investigation and prevention arm of the U.S. Treasury.
A beneficial owner in a business is any person who has a significant ownership stake in the company. A person is a beneficial owner if the individual has major influence on the company’s operations and decision-making, has significant control over the company’s equity, or if the individual owns 25% or more of the company’s shares.
A person who is identified as a beneficial owner must be reported to the FinCEN. Businesses that must disclose this information include all domestic businesses, which means LLC’s and corporations. The required information includes beneficial owner details but also the company’s legal name, trademarks, and all relevant addresses. Different information on the owners is required depending on when the business was established.
Many business owners are confused or even uninformed about the CTA, which is an additional report for small businesses to add to their task lists for annual reporting and other yearly reporting activities. Retaining the services of an accountant, tax professional, or attorney can help business owners navigate the new law. Be advised, however, that many accountants and tax professionals are not offering the service due to liability insurance limitations.
Unsure about how the Corporate Transparency Act affects you and your business?
Whether you are a new or long-time business owner, Sable Law Group Wisconsin can assist you in making sure your business is in compliance with the new legislation. We also draft and review commercial leases, draft and review contracts, conduct negotiations, assist with dispute resolution, business incorporation, drafting operating agreements and assisting with the everyday issues that occur while running your business.
[1] Fraraccio, Miranda. “What Every Small Business Needs to Know About the Corporate Transparency Act.” CO. U.S. Chamber of Commerce. 18 Dec 2023. Accessed 8 Jan 2024.