GRAND RAPIDS, Mich. -- A federal law that requires businesses to disclose beneficial ownership information has new provisions that went into effect January 1.
The goal of the Corporate Transparency Act (CTA) is to promote transparency and prevent illegal activities. Peter Veldkamp is an employment attorney with the Rhoades McKee law firm in Grand Rapids. He told WOOD Radio most businesses will have to file a report with the Financial Crimes Enforcement Network.
"For anyone that's identified as a beneficial owner, they'll need to provide their name, their address, an identifying number from an acceptable form of identification," Veldkamp said. "So, a driver's license or a passport. As well as an image of that identification document."
The CTA was enacted in 2021, but new rules concerning beneficial ownership information reporting took effect on Jan. 1, 2024. A report disclosing their beneficial owners is due no later than Jan. 1, 2025. Impacted businesses that violate the reporting requirements could be fined up to $500 per day, with a maximum penalty of $10,000.
"The federal government needed a mechanism to essentially see what individuals are behind some of these companies. And they cite things like drug trafficking, fraud, terrorist financing. Some pretty scary (federal) crimes," Veldkamp said.
If they meet certain criteria, some large operating companies may be exempt from reporting. For example, if they employ more than 20 full-time employees and file a federal income tax return with more than $5,000,000 in gross receipts or sales.
Veldkamp noted that a lot of small business owners end up bearing the compliance burden of the Corporate Transparency Act, because they operate as a Limited Liability Company or corporation and do not satisfy any of the exemptions. He says many are not even aware the law is in effect.
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