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The Corporation Transparency Act is Back!

August 5, 2013

Once again, Senator Carl Levin (D-Mich.) has introduced his Incorporation Transparency Act, as reported on Accounting Today.  As with previous iterations, this act would require states (or registered incorporation agents) to collect and hold for the possible inspection of law enforcement detailed information about the ‘beneficial owners’ of any new corporation or LLC.  And, as with previous iterations, this bill still has many problems.  By ‘beneficial owners’ the government wants to know who really controls a corporation.  However, if the true power behind the curtain isn’t being honest with the incorporator, there is no real way to know.  Additionally, many attorneys (such as myself) create companies on behalf of clients; this bill would require attorneys to provide the identity of their clients to government agencies, thus possibly violating the duty of confidentiality between attorney and client.  Senator Levin has introduced this bill in some form in several previous congresses; his initial co-sponsor was then-Senator Obama.  The article cited above is heavy with praise by law enforcement, but says nothing about the bill’s reception by the various States’ Secretaries of State, Governors’ associations or business association.  And let’s face it, a law such as this would significantly chill business operations and start-ups.  Some take the position that if you have nothing to hide, you have nothing to fear.  But this is always the mantra of those who seek to exert more control than a free society would warrant.

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