Arizona small business owners are now required to file more information with the federal government, courtesy of the Corporate Transparency Act.
Many business owners operate under LLCs for a multitude of reasons. Some owners leave their personal identities out of their companies to limit the risks and liabilities, while others simply prefer the privacy that LLCs offer.
The Corporate Transparency Act, which went into effect earlier this year, now requires the owners of these entities to report basic ownership information to the federal government.
Paul Ward, the owner of an IT and marketing consulting firm, is one of them.
"I don't know that a lot of people know about it. I have a lot of friends in business, and I don't know that they know about it," he said.
The information for filing is on federal websites, but Ward says business owners were never directly told by the government about the latest change.
"I think if you are somebody that engages with lawyers or CPAs you probably would have heard about it through them, but there's been no official channel about it at all," he stated.
According to the Arizona Commerce Authority, there are about 600,000 small businesses in the state.
Kimber Howard, a paralegal at Davis Miles who specializes in the Corporate Transparency Act, says a good majority of them will be required to file this paperwork.
"If they meet certain type of criteria, such as having 21 employees, if they do $5 million a year if they have an actual physical facility that they work out of. All three of those together will exempt an entity from having to file," according to Howard.
She also said larger corporations won't be affected by this new law, because they are already heavily regulated.
Howard helps a lot of small businesses in Arizona file for the Corporate Transparency Act and said she constantly gets asked why the federal government is doing it. She said the government is trying to stop criminal activity from hiding behind LLCs.
"A lot of companies, their members are other companies. So you have to kind of follow the paper trail as to find out who the owner, the actual individual is of that company," she said.
Keeping a compiled list of the business owners allows the federal government, "To stop laundering and supporting certain things that are going on around the world that are not to our benefit. Terrorism or things of that nature. We want to really stop terrorism or funding any type of terrorism," according to Howard.
Business owners can learn more information on exemptions and file on the FinCEN.gov website. If a business was created in 2024, an owner only has 90 days to report the information through the Corporate Transparency Act. If the business was established prior to this year, an owner has until the end of this year to get their information reported.
Howard said if companies don't file it, they'll be subjected to a fine of $500 a day.
