The U.S. Department of the Treasury has mandated that small businesses operating in the United States must submit a report by the end of the year, with potential fines of up to $10,000 or more for those who fail to comply with this new requirement. Evidence indicates that many businesses have yet to adhere to this mandate.
According to a report by CNBC, the Corporate Transparency Act, passed in 2021, established this requirement. The act, which came into effect in January of this year, aims to combat illicit financial activities by compelling many businesses operating in the U.S. to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury.
Many businesses are required to submit their initial beneficial ownership reports by the final deadline of January 1, 2025.
Approximately 32.6 million entities, including certain corporations, limited liability companies, and other types of businesses, are estimated by the federal government to be subject to this requirement.
FinCEN stated that this data helps identify individuals who directly or indirectly own or control a company, making it “more difficult for bad actors to hide their ill-gotten gains or benefit from them through opaque ownership structures or shell companies.”
However, many businesses may not realize the severity of failing to comply with this new requirement. According to FinCEN, non-compliant businesses and owners could face civil penalties of up to $591 per day for failure to report, and violations may result in criminal fines of up to $10,000 and up to two years of imprisonment.
Companies established before 2024 must submit their reports by January 1, 2025. Companies established in 2024 have 90 calendar days from their date of establishment or registration to file, while companies established in 2025 or later have 30 calendar days to do so.
Several exceptions are included in this requirement; for instance, companies with a gross sales exceeding $5 million and more than 20 full-time employees may not need to report.
Many large corporations, banks, credit unions, tax-exempt entities, and public utilities—entities not bound by this new requirement—have already provided similar data.