Kelly Bullis: Attack on small businesses via the Corporate Transparency Act of 2021

Many small business owners breathed a sigh of relief when Nancy Pelosi gave up the gavel as speaker of the House. No more crazy laws attacking liberties. BUT WAIT! She passed a sleeper. Once of the first new Biden laws.

If you don’t comply, you could be subject to a $500 per day ($182,500 per year) penalty AND a possible 2 years in jail. OUCH!

Exempt from reporting are businesses with 20 or more employees, AND filed a prior year Federal Income Tax Return, AND had over $5 million in gross sales, AND has a physical presence within the United States. There is quite a long list of other types of businesses, such as non-profits, banks, securities brokers, insurance companies, public utilities, governmental authorities, investment advisers, and accounting firms mostly.

Currently, the first group in the crosshairs, starting Jan. 1, are NEW business entities. (corporations, limited liability companies, and partnerships.) This only applies to those businesses which were created Jan. 1, 2024, and forward. They have 30 days from the date of creation to satisfy the reporting requirements of this act. The rest (all businesses formed before Jan. 1, 2024), must report sometime during 2024 and will be considered late on Jan. 1, 2025.

To make this clear, if you formed a corporation, an LLC, or a partnership, to put some real estate in, or run your small business in, you are most likely subject to this. It is estimated that over 32 million entities will be subject to the reporting requirements of this law.

What to report? Legal name (and applicable dba) of the company. It’s address, state of jurisdiction, IRS taxpayer ID number. Each “beneficial” owner’s name, date of birth, address, ID number from either … U.S. passport, or state driver’s license, or ID issued by local government, along with a digital image of that item.

What is a “Beneficial Owner?” This act defines a “Beneficial Owner” as somebody who exercises substantial control over a reporting company or owns or controls at least 25% of the ownership interest on a company. Substantial control is defined as someone who is a senior officer, or has authority to appoint or remove senior officers or directors, or is an important decision-maker. (Has substantial influence over business activities, or business finances, or business structure.)

How to report? Must be done by using a secure filing system made available via FinCEN’s Website. (https://www.fincen.gov/boi). NOTE: If you go that that website now, they haven’t figured out how this will actually be done yet. It is assumed that you will need to “register” an account on that website, then fill out an online form, starting Jan. 1.

Nobody knows if this will be an annual requirement or only when a change in beneficial owners. Stay tuned.

Have you heard? 1 Samuel 8:18 says, “You will cry out in that day because of your king whom you will have chosen for yourselves; and Yahweh will not answer you in that day.”

Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 775-882-4459. On the web at BullisAndCo.com. Also on Facebook.