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Distributor's Link Magazine Spring 2020 / Vol 43 No2

48 THE DISTRIBUTOR’S

48 THE DISTRIBUTOR’S LINK Jim Truesdell James Truesdell is President of Brauer Supply Company, a distributor of specialty fasteners, insulation, air filtration, and air conditioning with headquarters in St. Louis. Mr. Truesdell is adjunct professor at Saint Louis University and Webster University. An attorney and frequently published writer, he is the author of “Total Quality Management: Reports From the Front Lines”. ’CORPORATE TRANSPARENCY ACT’ MAY ADD TO SMALL BUSINESS PAPERWORK WOES A bill passed the House of Representatives in October with bi-partisan support which has small business owners concerned about new paperwork burdens as well as the risk of private information getting into the wrong hands. The Corporate Transparency Act is aiming to create a national database of what are referred to as “beneficial owners” of corporations with the aim of helping law enforcement go after money laundering, terrorists and shell game operators who set up limited liability companies with nefarious aims. Sounds like a noble cause! But as is often the case, these good intentions will likely translate into a lot of work and perhaps fines and liabilities for innocent small businesses who will bear the burden of putting the information together. Instead of beefing up enforcement and utilizing reporting mechanisms that are already in place it will, as always, take the easy route of passing on the task to the entrepreneurs who are busy providing the jobs and products that have our economy pumping on all cylinders. It’s hard for congressional representatives to resist such a seemingly good cause, which is why trade associations like the National Federation of Independent Businesses are being so forthright in pointing to the paperwork burden as the Senate considers their version. The House Bill would set federal standards to ensure that in all states corporations would file information not only about who is involved in the formation of limited liability companies, but would also call for “beneficial owners” to be identified in an effort to get at organizations with hidden influencers who may be up to no good. The problem is that the definition of beneficial owner is by its very nature ambiguous. Nevertheless, for each of these persons the filing business will be required to provide CONTRIBUTOR ARTICLE full legal names, dates of birth, addresses and a unique identifying number from a non-expired personal ID card or drivers license. The NFIB has produced a study that estimates that covered small businesses would be required to complete an annual average of 13.2 million additional paperwork hours per year over the next decade which they translate into over half a billion dollars in costs. What makes it particularly onerous is that the nature of this kind of information means that the reporting forms will probably have to be filled out by the owners themselves, meaning that it will be the most expensive form of labor and coming as an additional personal task for those whom we are hoping will continue to fire up our economy with their entrepreneurial efforts. Add to this the concern that there is a great risk that this personally identifiable information of business owners and their families could be hacked by bad actors. Think of the consequences of the breach of such a data base. Think of what havoc investigative journalists or political activists could make with this information which in and of itself does not represent anything but legitimate and legal business operations! The bill does exempt a large group of corporations who are otherwise regulated in this area or who fall into certain kinds of regulated activities. It seems that the burden will fall especially heavily on the small under the radar companies who might indeed be susceptible to financial shenanigans, but it will in the process tie up in paperwork the vast majority who run their businesses honestly and with no evil intent. The bill aims at those with fewer than 20 full time employees and under million in reported gross receipts. CONTINUED ON PAGE 126

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