“Pay no attention to that man behind the curtain! The great OZ has spoken!” – Wizard of OZ, 1939.

There have been tons of changes to the legal rights of all Americans since 9/11, initiated by both local and national legislators. It even seemed a while back that the fries we received with our Happy Meals were going to become freer than most of us were. Little of what has occurred has affected startups. However, that might now change. Senators Levin and Grassley recently introduced a bill that they titled the Incorporation Transparency and Law Enforcement Assistance Act. The purpose of the bill is to ensure that law enforcement authorities can at any time obtain from the states information about the beneficial owners of corporations or other business entities. Its purpose is:

“To ensure that persons who form corporations in the United States disclose the beneficial owners of those corporations, in order to prevent wrongdoers from exploiting United States corporations in ways that threaten homeland security, to assist law enforcement in detecting, preventing, and punishing terrorism, money laundering, and other misconduct involving United States corporations, and for other purposes.”

The reality of the bill, if it becomes law, is that it is going to make life more difficult for businesses, especially rapidly growing businesses that are raising capital and issuing equity on a regular basis. It is going to impose new burdens on persons starting businesses that don’t exist today, which will continue for the life of many companies. It is going to require states to create new bureaucracies to collect this information, and it is going to to levy potentially heavy fines and possible criminal penalties on people who don’t comply, whether their noncompliance was intentional or not.