A new law aimed at catching money launderers could surprise many Colorado small business owners
A new federal law requires nearly every business entity in Colorado to register with the Treasury Department’s Federal Crime Enforcement Network or face severe penalties.
The Corporate Transparency Act is intended to catch money launderers, but it applies to LLCs, BPOs, and corporations no matter how small.
Under the law, anyone who owns at least 25% ownership of a company — or runs a company — must file a useful ownership information report with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network or face fines of $500 per day up to $10,000. And up to two years in prison.
Jacqueline Webster, an artist-turned-entrepreneur, is among those affected by the law. She has a business in analogue photography in Golden and stumbled upon an article about the law online.
“They did not contact us in any way, it was just a coincidence that I found out about it,” she said.
Her reaction is what you might expect from someone who sells prints at art festivals and doesn’t know the first thing about starting a shell company.
“Wow, that hurts… I mean why would I do this?” she asked.
Dave Ratner of the Creative Law Network fears independent artists will be among many small businesses that will be caught off guard.
“Treasury may not be known for its marketing, so it’s… I mean that’s… I’m really glad you’re asking about that,” he said.
While penalties for non-compliance are severe, any company incorporated before January 1 has until the end of the year to comply.
New companies have 90 days. If you dissolve your business or make any changes — such as a new owner or address — you only have 30 days to update the file. The database is non-public and can only be accessed by law enforcement authorities.
Because small business owners register with the state and do most of their filing with the state, they may think federal law doesn’t apply to them, Ratner says. While they shouldn’t ignore it, he says, they shouldn’t worry about prison time either.
“However, the penalties are… specifically for willful failure… to file. In other words, ‘I knew I had to file and I failed to file’ or ‘I knew I had to file and I filed Fraudulently,” he said.
Webster says she’s trying to spread the word.
“I mentioned it to a couple of friends and they were like, ‘What? Huh? And it’s not a big deal, it’s just another thing to keep track of,'” she said.
She says applying requires her to upload her driver’s license or passport, but it only took about 20 minutes, and it’s free.