Small Business Owners Urged to Register With FinCEN Despite Legal Uncertainty

Small business owners should be aware of a rule, currently in legal limbo, that would require them to register with the Financial Crimes Enforcement Network (FinCEN) by January 1st. This registration is part of the Corporate Transparency Act, an anti-money laundering statute passed in 2021. Under the CTA, the owners and part-owners of an estimated 32.6 million small businesses must register personal information with FinCEN, such as a photo ID and home address.

Registering isn't difficult, but if a small business owner is unaware of the requirement, they could face penalties of up to $10,000. Businesses with more than 20 employees and more than $5 million in sales can qualify for exemptions. Currently, the rule is on hold. On December 3rd, a federal court in Texas issued a preliminary injunction prohibiting enforcement of the rule. FinCEN has stated that registering is voluntary. However, the injunction could be overturned on appeal, so small business owners should stay informed about the case. The act was designed to shed light on shell companies and combat attempts by “criminals, organized crime rings, and other illicit actors to conceal their identities and launder money through the financial system,” Treasury Secretary Janet Yellen stated in 2022. Initially, the rules were set to take effect in 2024 and existing businesses had until January 1st, 2025, to register. However, businesses that began in 2024 were given 90 days to register

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