The Financial Crimes Enforcement Network (FinCEN) – yes that’s an entity of our BIG government — has issued a rule that will significantly impact a wide range of small businesses.

This rule, set to take effect on January 1, 2024, mandates the reporting of beneficial ownership information in accordance with the Corporate Transparency Act. This act was passed in 2021 and our very own Rep. John Rutherford voted for it. He was one of 25 Republicans who voted with the Dems.

The final rule applies to businesses including corporations, LLCs, and similar entities formed by filing with the secretary of state or a similar agency, meeting specific criteria:

1. Having 20 employees or fewer.
2. Reporting $5 million or less in gross receipts or sales in the previous year’s federal tax returns.

Entities subject to this rule must provide comprehensive details about themselves, including:

1. Full legal name of the company.
2. Any trade name or alias used for the business.
3. Current address, typically the main office or primary U.S. location where the business operates.
4. The state or tribal jurisdiction where the company is registered.
5. Taxpayer ID number.
6. Employer Identification Number (EIN) or Social Security Number.

So think about this – if you are a registered small business such as a hairdresser, a lawn maintenance guy, a local retail establishment or restaurant, or any other tiny businesses registered with the state, you get to file your private information with the crimes unit of our government even though the IRS already has that information. If you are a sole proprietor, you will be exempt because you do not have an official entity registered with the state.

Eye reached out to Rep. Rutherford for comment and he stood by his vote stating:

“This is why it’s a good idea. There are also many small businesses which will be excluded under 4(D).

“Congress finds the following:

(1) Nearly 2,000,000 corporations and limited liability companies are being formed under the laws of the States each year. (2) Very few States require information about the beneficial owners of the corporations and limited liability companies formed under their laws. (3) A person forming a corporation or limited liability company within the United States typically provides less information at the time of incorporation than is needed to obtain a bank account or driver’s license and typically does not name a single beneficial owner. (4) Criminals have exploited State formation procedures to conceal their identities when forming corporations or limited liability companies in the United States, and have then used the newly created entities to commit crimes affecting interstate and international commerce such as terrorism, proliferation financing, drug and human trafficking, money laundering, tax evasion, counterfeiting, piracy, securities fraud, financial fraud, and acts of foreign corruption. (5) Law enforcement efforts to investigate corporations and limited liability companies suspected of committing crimes have been impeded by the lack of available beneficial ownership information, as documented in reports and testimony by officials from the Department of Justice, the Department of Homeland Security, the Department of the Treasury, and the Government Accountability Office, and others. Most of the businesses you reference will be exempt.”

Eye informed Rep. Rutherford he was WRONG and sent him the actual documentation from the FinCen website. See the documentation for yourself. .

You can also see the article written by Forbes about this new regulation. Read it here.

The final rule is expected to have a significant impact on businesses with complex ownership structures. So if you have partners, you better get together to figure out how and when to file your business with the crimes unit of America.

And don’t think you can ignore this new rule. If you fail to provide complete and updated reports, severe consequences will be yours such as:

1. Criminal penalties of up to 2 years in prison.
2. Civil penalties of $500 per day, up to a maximum of $10,000.

FinCEN states that businesses are required to report their beneficial ownership information to FinCEN electronically through a “secure” filing system, WHICH IS CURRENTLY BEING DEVELOPED.

Did you read that? They haven’t even finished developing the system but they have the rules in place already. The government loves to put the cart before the horse!

Information on how to access and use this system will be available on FinCEN’s website.

This is such a terrible twist of the knife on the small businesses that make up America’s breadbasket. It’s tiresome writing about these infractions against We the People.

Thanks John Rutherford. Your vote has now put 32 million small businesses in the crosshairs of the Federal Crimes Unit. Next time, please consider the unintended consequences before you vote heavy regulations on your constituents.