The Corporate Transparency Act (CTA) enacted in 2021, is a federal legislation aimed at reducing money laundering and increasing transparency in business transactions. The Financial Crimes Enforcement Network (FinCEN), a unit within the Treasury Department, has been assigned the responsibility of identifying shell companies used for illegal activities. Under the CTA, businesses with annual sales of less than $5 million and fewer than 20 employees will be required to create a registry.
Millions of small businesses may soon be affected by the onerous reporting requirements and fines for noncompliance brought about by the CTA. Small businesses may not have the resources to comply with these new regulations or the financial means to pay any penalties that may arise from non-compliance. Therefore, it is crucial for small business owners to stay informed about these new regulations and their potential impact on their businesses.
The CTA represents a broad effort by the government to tighten money-laundering laws, but its implications for small businesses could be significant. Small business owners must closely monitor any changes in regulations and ensure that they are in compliance to avoid potential fines and penalties. This new legislation serves as another example of how small businesses can be disproportionately affected by federal regulation.