Beyond their intended goal, the cost of government regulations have far-reaching consequences. As a result, the National Federation of Independent Business (NFIB) strongly opposes The Corporate Transparency Act of 2019.
Corporate Transparency Act of 2019
The bill, H.R. 2513, starts off like this:
It wants to ensure people who form corporations or limited liability companies in the U.S. disclose the beneficial owners. This is to prevent wrongdoers from exploiting U.S. corporations and limited liability companies for criminal gain. With the goal of assisting law enforcement in detecting, preventing and punishing different crimes. This includes terrorism, money laundering, and other misconduct involving U.S. corporations and limited liability companies, and for other purposes.
Any law-abiding individual will agree with what the bill is trying to do, but as they say, the devil is in the details. And one of the details is the fact that it places additional burdens on small businesses. The bill explicitly excludes businesses with more than 20 employees who generate more than $5 million in gross receipts or sales.
For the millions of small businesses with up to 20 employees making less than $5 million, get ready for some more paperwork. Failure to comply can result in civil fines of up to $10,000 and criminal penalties of up to three years in prison.
Resources and Regulations
If you are a company making more than $5 million you probably have the resources to take on the cost of filing the paperwork of yet another regulation. But if you are a small business making much less than $5 million, it is another matter.
Most small businesses don’t have teams of lawyers, compliance consultants, and accountants. They do their own financial paperwork and record-keeping. The addition of H.R. 2513, means more time filling out paperwork and using resources a small business can ill afford to waste.
The problem is H.R. 2513 is not the only regulatory compliance small businesses have to abide by. Between federal and state regulations, small businesses are inundated with more paperwork. And although the Trump administration has gotten rid of some of these regulations, there are still many others in the books.
According to the NFIB, federal paperwork is a burden for its members. They say it is the 12th biggest problem they encounter out of 75 issues. And the NFIB is opposing the bill because of the additional burden it puts on small business owners.
Why the NFIB Opposes H.R. 2513
According to the NFIB, this legislation will add more regulatory burdens on small business.
It requires millions of small businesses to register with the Financial Crimes Enforcement Network. And they have to file annual reports with FinCEN for the life of the business. If they fail to comply, it will result in the above-mentioned penalties.
The NFIB is also concerned about the privacy issues of the bill. This legislation will give federal, state, local, or tribal law enforcement agencies broad access to personal information. The NFIB adds, this information can be used, “… for just about any reason — and without a subpoena.”
You can read the bill in its entirety here.
Image: Depositphotos.com
Aira Bongco
Yes. It is an extra task that must be fulfilled and this will incur extra cost as well.
Sometimes the government just can’t seem to get out of it’s own way. Or, usually they just need to get out of the way of SMBs and let them do what they do best.
Some regulations are good because some people suck
It’s your name, address, phone number, and ID. It takes 5 seconds to fill out unless you’re a complete moron. Stop complaining. I for one think it should apply to every single entity doing business in and/or registered in the United States, regardless of size, receipts, or type. It’s long past due for Congress to do something about shell companies, patent trolls, dark money flowing to campaigns, and entities operating to benefit criminals and individuals associated with our international rivals and enemies. This is only a small step and it involves barely any effort on your part. I am a privacy advocate, too, so they should nix the part about it being available to local law enforcement without a warrant… but it should be available to FinCEN and when they find something worth looking into it should be handed to the FBI.
ideas for the future
If you used a database for electronic paperwork for your business you could automatically populate fields and even set paperwork to automatically file every year at the same time. Perhaps the government should supply every business with a free suite of software that automatically downloads all necessary paperwork every year. All you need to do is answer each question once and update information that changes… and it automatically fills out everything for you and uploads it to the government when necessary. By using existing information it could come to you with a lot already completed.