Corporate Transparency Act: Law Targeting Small Business Privacy Just Kicked In

Do you enjoy the privacy afforded to you as a small business LLC? Too bad! The Corporate Transparency Act just kicked in in 2024.

January 22, 2024

By: Bobby Casey, Managing Director GWP

small businessIs it just me, or do the regulations restricting business tend to be inversely proportionate to the bailouts cronies tend to get. It’s unsettling when governments tighten their grip around the necks of the productive while pouring all their resources (along with the resources of unborn generations!) into propping up failed institutions.

As the “stimulus” of the pandemic era continues to wane, borrowing is up and saving is down. This is problematic for banks. As we mentioned a couple of weeks ago, there is something called the Bank Term Funding Program, which is propping up the banks, but set to expire in a few months.

This is meant to offset the disproportionate level of low deposits and high borrowing banks are seeing. This is corroborated even in mainstream milquetoast news streams where Bank of America’s CEO, Brian Moynihan, discusses the drop in consumer activity:

“Consumers’ activity has slowed down…It’s slowed by half, and that means the consumer is being slowed down by the interest rate environment and all the stuff going on.”

It turns out, when you give people checks to stay at home, they will stay at home because you paid them to stay home. Wildly unpredictable, I know. But that well ran dry, and now with the ensuing inflation (i.e. the further debasing of the USD) people are struggling to keep up with the cost of living and throttling their spending.

Another spicy development coming out of 2021, but only just now kicking in this January, is something called the Corporate Transparency Act (CTA). Former President Donald Trump initially vetoed it in 2020, but that veto was overridden by congress, and it ultimately passed in 2021.

This law:

  • …requires most businesses to identify their beneficial owners (someone who owns at least 25% of the company OR who has “substantial control” over it) to the U.S. Treasury Department’s Financial Crimes Enforcement Network Fin CEN.
  • applies to U.S. corporations, limited liability companies and any other entities created by the filing of a document with a secretary of state or any similar office in the U.S. It also applies to companies formed under the law of a foreign country that have registered to do business in the U.S.

The privacy once provided by corporate structuring is being peeled away, in the name of “safety”. Same usual suspects too: prevent money laundering, stop terrorism, and stop the drug cartels. Everything is in service of stopping these three culprits. Lawmakers are becoming Machiavellian about it, to the point where your privacy as a law-abiding individual is finally on the chopping block.

This isn’t coming after the larger multi-nationals or the big dogs to hold their feet to the fire. No. This is designed specifically for smaller businesses and solopreneurs. According to the Small Business Association there are 33,185,550 small businesses in the United States, of which 81.7%, or 27,104,006 of them, have no employees. These are the ones who will be swept up in this dragnet.

There are some narrow exemptions, but this law will apply to the vast majority of LLCs and Corporations registered to do business in the US. The article goes on to say:

…The law does not apply to companies (a) with at least 20 full-time employees in the U.S.; (b) that file a U.S. federal income tax or information return showing more than $5,000,000 in U.S. gross receipts or sales for the prior fiscal year; and (c) have an operating presence at a physical office in the U.S.

They are serious about this, and the penalties reflect that. The civil penalties can total up to $10,000 at $500 per day, while the criminal penalties can incur up to two years in prison.

Interesting to note: the information doesn’t become public. It’s meant only for government and law enforcement to have visibility. Because they are such trust-worthy institutions, right? It’s not like they’d abuse that power or anything.

Oh wait… there is this:

Rep. Jim Jordan (R-Ohio) is requesting a transcribed interview with a former Financial Crimes Enforcement Network (FinCEN) official for allegedly flagging consumer transactions that had the phrases “TRUMP” or “MAGA” in them.

Also this:

How the FBI Violated the Privacy Rights of Tens of Thousands of Americans: A recently released secret court ruling found that the government’s warrantless surveillance of emails routinely violated the Fourth Amendment.

Or famously this:

Section 702 of the Foreign Intelligence Surveillance Act permits the U.S. government to engage in mass, warrantless surveillance of Americans’ international communications, including phone calls, texts, emails, social media messages, and web browsing. The government claims to be pursuing vaguely defined foreign intelligence “targets,” but its targets need not be spies, terrorists, or criminals. They can be virtually any foreigner abroad: journalists, academic researchers, scientists, or businesspeople. And in the course of this surveillance, the government casts a wide net that ensnares the communications of ordinary Americans on a massive scale — in violation of our constitutional rights.

But I’m sure THIS time, they won’t abuse their power right? The government is happy to protect you from the private sector criminals, and save you for themselves. They hate competition.

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