What Every Small Business Needs to Know About the Corporate Transparency Act
The Corporate Transparency Act (CTA), effective January 1, 2024, introduces new U.S. federal requirements that may impact your small business. Here’s what you need to know to stay compliant.
What Is the Corporate Transparency Act?
The CTA was enacted to combat illegal activities such as tax evasion, money laundering, and terrorism financing by requiring certain U.S. businesses to report beneficial ownership information. Now, businesses meeting specific criteria must file a Beneficial Ownership Information (BOI) Report with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). This report collects information about individuals with substantial ownership in the business, helping the government improve transparency around business ownership.
Filing Requirements and Deadlines
For eligible businesses, the initial filing deadline is January 1, 2025. Failing to meet this deadline could result in severe penalties, including civil fines of up to $591 per day, up to $10,000 in total, and potentially even imprisonment for up to two years.
Key Deadlines for Filing:
- Established Before January 1, 2024: File by January 1, 2025.
- Established Between January 1, 2024, and January 1, 2025: File within 90 days of formation or public announcement.
- Established After January 1, 2025: File within 30 days of formation or public announcement.
Who Is Considered a Beneficial Owner?
Under the CTA, a beneficial owner is anyone who:
- Holds at least 25% ownership of the business.
- Has substantial control over business operations or decisions.
This includes those who influence key aspects of the business, even if they don’t hold a majority stake.
Information to Be Reported
Your business will need to provide detailed information on all beneficial owners, including:
- Legal name and business address.
- Taxpayer identification number.
- Jurisdiction of formation.
For businesses registered after January 1, 2024, information on company applicants—such as names, birthdates, addresses, and ID numbers—is also required.
Updating Beneficial Ownership Information
Once your initial report is filed, you’ll need to keep it updated. FinCEN requires updates within 30 days of significant changes, such as:
- Change in a beneficial owner’s address.
- Legal name changes.
- New individual gaining substantial control.
Failure to update your BOI report promptly could lead to penalties.
Reporting to FinCEN vs. Financial Institutions
While financial institutions often require beneficial ownership information, this does not satisfy the federal CTA requirements. Reports to FinCEN are separate and mandatory for qualifying businesses.
Navigating the Filing Process
Businesses can file their BOI reports electronically through FinCEN’s website. Though there’s no fee to file, navigating the process may be complex, especially for companies with multiple owners or unique ownership structures.
FILE Yourself directly on the FinCEN BOI E-Filing System
When to Seek Professional Help
While you can file your report independently, consulting an accountant or attorney can help ensure you meet all requirements and deadlines. This is particularly valuable for complex ownership structures or when there’s ambiguity about who qualifies as a beneficial owner. If you choose to work with a specialist, confirm they have experience with BOI filings and reasonable fees.
BOIR.COM makes it easy for businesses to file their Beneficial Ownership Information Report.
Final Thoughts
Compliance with the CTA can help protect your business and prevent future issues. While this new reporting requirement may feel like a challenge, staying informed and proactive will help you manage the transition smoothly.
For further advice, consider consulting a professional who can guide you through the process based on your unique business structure and needs.