Additional federal paperwork isn’t welcomed by any business owner, but the Corporate Transparency Act (CTA) may be especially problematic for immigrant-owned businesses. As an international litigation lawyer can explain, the law requires ownership disclosures to the federal government to cut down on illegal money laundering and tax evasion.
What Is The Corporate Transparency Act?
Under the CTA, which went into effect at the start of this year, many (but not all) small business owners must file corporate transparency reports containing beneficial ownership information.
For most reporting businesses, the filing deadline is January 1, 2025. If you fail to do so in time or update this information as necessary in the future, you could face criminal and civil penalties of up to $591 per day for an intentional violation, according to the US Chamber of Commerce.
The law was passed in 2021 to combat illegal activity such as tax fraud, financing terrorism, and money laundering by gathering more ownership information for specific US businesses. Companies meeting the law’s criteria must submit a Beneficial Ownership Information (BOI) Report to the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). The report provides details about individuals associated with the company.
How Will The Law Impact Immigrant-Owned Businesses?
The incoming Trump administration puts a heavy emphasis on deporting undocumented immigrants. The law and the information it requires, which the federal government will store, creates concerns among immigrant business owners, reports WGBH, which may have significant consequences.
Undocumented immigrants may be unwilling or reluctant to comply with the CTA, fearing that the information they provide may attract the attention of immigration authorities. On the other hand, being caught not complying will also attract the federal government’s attention.
A company could be started by an immigrant who received a visa to enter the US but violated its terms by staying in the country. Visas are issued to:
- Tourists
- Students
- Family Members of those in the US
- People getting medical treatment
- Conduct business
- Work temporarily or by being sponsored by an employer
This situation may be more common than many realize as our friends at Focus Law LA can explain. As sensible as it might be, no visa is currently issued to noncitizens who want to come to the US to start a business.
The world’s wealthiest person, Elon Musk, is from South Africa. He’s reported to have violated the terms of his US student visa by spending his time starting and running a company in California instead of attending graduate school at Stanford University.
If the US Citizenship and Immigration Services knows who has overstayed their visa, they may have access to the database and search for their name. One reason for the CTA is to prevent money laundering, and the fact an undocumented immigrant owns a company may be seen as a risk factor.
If you own a business and have questions about the CTA or immigration law, contact your attorney to discuss your concerns and learn more. They will be able to walk you through how the new laws affect your business and other areas of your life.