New law meant to catch money launderers could catch many small business owners in Colorado off guard
A new federal law requires almost every business entity in Colorado to register with the Treasury Department's Federal Crimes Enforcement Network or face steep penalties.
The Corporate Transparency Act is meant to catch money launderers, but it applies to LLCs, DBAs, and corporations no matter how small they are.
Under the law, everyone who has at least a 25% ownership in a company -- or who manages a company -- has to file a Beneficial Ownership Information report at the U.S. Treasury of 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 impacted by the law. She has an analog photography business in Golden and stumbled across an article about the law online.
"They didn't reach out to us in any way. It was just strictly happenstance that I found out about it," she said.
Her reaction is what you might expect from someone who sells prints at art festivals and wouldn't know the first thing about setting up a shell corporation.
"Wow, that's a pain. I mean, why am I doing this?" she asked.
Dave Ratner with the Creative Law Network worries independent artists are among the many small businesses that will be caught off guard.
"The Department of Treasury may not be known for their marketing. ... I'm really happy you're asking about it," he said in a video call with CBS Colorado.
While the penalties for noncompliance are steep, any businesses established before Jan. 1 has until the end of the year to comply.
New businesses have 90 days. If you dissolve your business or make any changes - like a new owner or address - you only have 30 days to update the filing. The database is non-public and only accessible by law enforcement.
Ratner says, because small business owners register with the state and do most of their filings with the state, they may think the federal law doesn't apply to them. 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've mentioned it to a couple of friends and they were like 'What? Huh?'" she said. "And it's not a big deal, it's just one more thing to keep track of."
She says the filing required her to upload her driver's license or passport, but it only took her about 20 minutes, and it is free.
