In 2021, Congress passed the Corporate Transparency Act, a piece of bipartisan legislation that became effective on January 1, 2024. The new federal rule now requires more than 32 million small businesses nationwide to file ownership information to an agency in the U.S. Treasury Department or face potential penalties, however, many of these businesses don’t know about it, reported The Wall Street Journal.

The legislation was passed with hopes it will curtail the use of anonymous shell companies and track the flow of illicit money, stated the Journal. The law creates a beneficial ownership database and reporting requirements for companies to file ownership information to FinCEN, similar to existing requirements in the U.K. and the European Union.

The Journal reports that the Financial Crimes Enforcement Network, the anti-money-laundering bureau of the Treasury Department, says it has been working hard to inform those affected by the new law, spreading the word through social media and asking other government agencies to help. But small-business advocates say more needs to be done.

“As we talk to small businesses, there is a great lack of awareness on this,” said Todd McCracken, president of the National Small Business Association. The advocacy group in 2022 filed a lawsuit challenging the law.

Entities created in 2024 have 90 days to file after they initially register, making early April the first possible deadline, while companies created before this year have one year to file their report, according to FinCEN. The report includes identifying information about who directly or indirectly owns or controls the company, including names, addresses, and identification documents.

Not filing ownership information to FinCEN can carry significant criminal and civil penalties, including for companies’ senior executives, according to the agency. Willful failure to comply can also lead to fines of up to $591 a day for each violation.

Part of the reason for the lack of awareness, those working with small businesses say, is the unfamiliarity with FinCEN itself, a small, relatively obscure bureau that in the past typically dealt with banks and other financial institutions, said The Journal.

In an NSBA survey of its membership published in November, about 47% of respondents said they had no idea what the Corporate Transparency Act was, while another 25% said they had heard of the law but didn’t know whether they needed to report. Only about 16% said they were aware and did have to report and 12% said they were aware but weren’t required to report.

“FinCEN has never dealt with small businesses, and small businesses don’t know who FinCEN is and FinCEN doesn’t know how to regulate the small businesses,” McCracken, the NSBA president, said.

The reporting requirements, which exempt businesses with more than 20 employees as well as many heavily regulated public entities, focus primarily on small and private companies.

The S Corporation Association (SCORP), hosted a webinar in December that discussed the Corporate Transparency Act, and how it will affect small businesses, including key dates, what must be reported, and key exemptions.