New federal law meant to catch money launderers could catch Colorado small business owners off guard

New federal law meant to catch money launderers could catch Colorado small business owners off guard

The Corporate Transparency Act requires small businesses in Colorado to register with the Treasury Department’s Federal Crimes Enforcement Network, potentially causing confusion and additional administrative burden.

A new federal law, the Corporate Transparency Act, has been enacted to combat money laundering. However, its broad application to all business entities, regardless of size, has caught many Colorado small business owners off guard. The law mandates that anyone with at least a 25% ownership stake or management role in a company must file a Beneficial Ownership Information report with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) or face significant penalties.

Small business owners unaware of the law’s requirements

Jacqueline Webster, an artist turned entrepreneur, discovered the law by chance while browsing online. She runs an analog photography business in Golden and expressed surprise at the law’s implications for her small operation. Webster’s reaction reflects the sentiments of many independent artists and small business owners who lack familiarity with setting up shell corporations and find the law burdensome.

Lack of proactive communication from authorities raises concerns

Dave Ratner, an attorney with the Creative Law Network, highlights the lack of proactive communication from the Department of Treasury regarding the law’s requirements. Ratner emphasizes that independent artists and other small businesses may be caught off guard due to the government’s limited efforts to inform them about the law. He stresses the importance of raising awareness about the law’s implications.

Understanding the penalties and compliance timeline

Noncompliance with the Corporate Transparency Act carries steep penalties, including fines of up to $10,000 and imprisonment for up to two years. However, businesses established before January 1 have until the end of the year to comply, while new businesses have 90 days. Any changes, such as a new owner or address, necessitate updating the filing within 30 days. It is crucial for small business owners to understand the compliance timeline to avoid penalties.

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Clarifying the scope of the law for small business owners

Ratner explains that small business owners often assume that federal laws primarily apply to larger corporations and overlook their own obligations. While small business owners should not ignore the Corporate Transparency Act, Ratner clarifies that the penalties are specifically for willful failure to file or fraudulent filings. Understanding the law’s nuances can help alleviate concerns about potential prison time.

Spreading awareness and navigating the filing process

Webster has taken it upon herself to inform friends and fellow small business owners about the law’s requirements. She emphasizes that the filing process, which involves uploading identification documents such as a driver’s license or passport, is relatively simple and can be completed within approximately 20 minutes. Additionally, she highlights that there is no cost associated with the filing.

Conclusion: The Corporate Transparency Act’s broad application to small businesses in Colorado has caught many owners off guard. While the law aims to combat money laundering, its lack of proactive communication from authorities has raised concerns among independent artists and small business owners. Understanding the compliance timeline and penalties is crucial to avoid potential repercussions. Spreading awareness and providing guidance to fellow business owners can help navigate the filing process smoothly. As small businesses adapt to this new requirement, it remains to be seen how the law will impact their operations in the long term.