Colorado business owners registered with the Colorado Secretary of State must let the federal government know who holds a significant stake in them before Dec. 31 or risk hefty fines.
The Corporate Transparency Act, which went into effect at the start of the year, requires corporations, partnerships and LLCs in the U.S. to report "Beneficial Ownership Information" to the Department of Treasury's Financial Crimes Enforcement Network .
The act seeks to give financial regulators more insight into who owns businesses and help curtail illegal activities like money laundering, especially by foreign players. That obligation had fallen mostly to banks and financial institutions.
Essentially, if someone filed to organize a business with a state agency, they must share that information with Treasury's network unless they are exempt.
The process takes a few minutes and can be done online for free at www.fincen.gov/boi. Failing to file or providing false information could result in civil penalties of $500 a day. Businesses have until the end of the year to file a report with FinCEN.
"You don't need an accountant or lawyer to file your beneficial ownership information," said FinCEN's Beneficial Ownership and Innovation Chief Phil Lam, on a webinar hosted by the U.S. Small Business Administration last month.
Business owners should be on the lookout for agents or consultants trying to profit off what is a simple filing that is provided for free.
A beneficial owner is an individual who owns, directly or indirectly, a quarter or more of the company that is reporting. Ownership includes equity, options voting rights, capital or profit interest and control of convertible instruments.
It also applies to someone who "exercises substantial control" over a company, even if they own a smaller share than that threshold.
"The individual is an important decision-maker. … People know who these folks are within the business," said Michael Dobson, a senior advisor at FinCEN.
There are 23 exemptions from having to file, including for banks, mortgage lenders, securities firms, utilities and nonprofits.
Companies with 20 or more full-time employees are excluded, although that could change. Larger firms are more likely to have already shared ownership information with their lenders or federal authorities. Minors who have an interest are also excluded.
Sole entrepreneurs who haven't registered with the Secretary of State and fully own their firms also don't have to file. Firms that are not operating or otherwise active are also excluded.
Businesses formed after Jan. 1 of this year must also disclose additional information to FinCEN about the person who made the registration application. There are no annual filing requirements once an initial report is made, but FinCEN must be updated whenever there is a change in beneficial ownership.
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