Small business owners face hefty penalties if they fail to report to the federal government by the end of the year.
Thousands of companies may not realize that they are subject to a new reporting process imposed by the Corporate Transparency Law, which took effect in January 2024.
For most eligible businesses, the filing deadline is January 1, 2025, according to the U.S. Chamber of Commerce.
“Those who fail to submit their declaration within this deadline – or fail to update this information as necessary – could face imprisonment of up to two years and fines of up to 10 000 dollars, in addition to civil penalties of up to $591 per day.” The United States Chamber of Commerce website reads.
“If you have filed something with the Secretary of State or similar office”
The Business Transparency Act initially caught the attention of business owners when it became law in January 2021, said Roger Miller of Mizick Miller & Company, an accounting firm that serves clients throughout midtown. northern Ohio. But three years passed before the new law took effect.
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“People really didn’t know about it until late last year,” Miller said. “It was there, but no one really knew much about it.”
Many small business owners in the state are still unsure whether they are required to file, according to Zach Chatlain, CPA at Mizick Miller.
“If you filed something with the secretary of state or similar office to create your entity, you are required to do that,” Chatlain said.
This means that even the owner of a single-member LLC is required to file, as are all corporations (including S corporations) and larger LLCs.
“People just start their own LLC and we don’t know it”
Registering a home business with the Secretary of State is a simple process for most.
“I get new clients all the time who have already done it themselves,” Chatlain said. “They go out there and automatically start their own LLC when they start a business or when they start selling lemonade. That’s kind of what everyone does now is just go get an LLC very quickly.”
Some people forget that they registered a small business, and others never think to tell their lawyer or accountant.
“People just start their own LLC and we don’t know about it,” Miller said. “We don’t know they exist because they always file under their Social Security number.”
Many lawyers and accountants have warned their clients about the impending deadline of the corporate transparency law, but they can only tell those they know.
For Mizick Miller accountants, small businesses make up about 90% of their clientele. About half of those businesses are sole proprietorships, like housekeepers and landscapers, who had no idea the federal law hit them.
“We recommend even if they are inactive to file”
Companies that meet the reporting criteria must submit a Beneficial Ownership Information Report to the US Treasury Department Financial Crimes Enforcement Network (FinCEN)according to the American Chamber of Commerce.
The law was created “to combat illicit activities, including tax fraud, money laundering, and terrorist financing, by collecting more information on the ownership of specific U.S. companies operating in or accessing the country’s market ” explained the chamber’s website.
If anyone is wondering if they may have created an LLC for themselves in the past, they can check online.
“Go to the secretary of state and see if there’s a name in there,” Miller said. “We recommend even if they are inactive to file an application.”
Anyone unsure of the process should contact their attorney or accountant for more information.
The alternative is to wait and see how seriously the federal government wants to penalize those who don’t comply.
“We don’t know what they’re going to do,” Miller said. “They really scared everyone.”