Business Owners, Here’s What You Need to Know About the Corporate Transparency Act

Paige Smith

A new year often brings new business regulations. It’s critical for business owners to know about the Corporate Transparency Act (CTA), which went into effect on January 1, 2024. Under the act, businesses have to report information about their company’s ownership to the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). 

Keep reading for more information about the CTA, who’s required to comply, and how to submit reports. 

What is the Corporate Transparency Act? 

Enacted in 2021, the CTA is a bipartisan law that requires certain businesses to provide identifying information about their owners to FinCEN in what’s referred to as a beneficial ownership information (BOI) report

According to the government, the purpose of the CTA is to create a centralized database of beneficial ownership information to help prevent financial and illicit crimes, including tax fraud, money laundering, and drug trafficking. 

Which businesses have to comply with the CTA? 

Businesses required to submit BOI reports are called reporting companies. There are two types:

  1. Domestic reporting companies refer to any business entity that was created by filing documents with a secretary of state or similar US office. That includes C corporations, S corporations, limited liability companies (LLCs), and partnerships.
  2. Foreign reporting companies refer to any business entity that was formed in an international country and has registered to do business in the US by filing with a secretary of state or similar office. That includes C corps, S corps, LLCs, and partnerships. 

Because sole proprietors don’t need to register their business with a government office to operate, they’re not considered reporting companies and don’t have to submit BOI reports. Unless you fall into one of the exempt categories (listed below) or operate as a sole proprietor, your business likely counts as a reporting company. 

Which businesses are exempt? 

FinCEN has a list of 23 types of business entities that are exempt from the BOI reporting requirements. The list includes publicly traded companies and non-profit organizations that meet specific criteria, as well as large corporations in industries like insurance, securities, and accounting. 

FinCEN also has exemptions for revenue and business activities. Companies that earned more than $5 million in gross receipts in the previous year, for example, may not have to report BOI. See the full list of exempt businesses.

Who is a beneficial owner? 

BOI reports require you to share identifying details about all beneficial owners. FinCEN defines a beneficial owner as any individual who directly or indirectly meets at least one of the following criteria:

  1. Exercises substantial control over the reporting company, either as a senior executive, key decision-maker, or someone with the authority to appoint or remove significant roles within the company. 
  2. Owns or controls at least 25% of the reporting company’s ownership interests, including equity, stock, convertible instruments, voting rights, capital, or profit interest

What information do you have to report? 

In addition to providing your business’s name, address, and tax ID number, you have to provide the following information for each beneficial owner: 

  • Name
  • Date of birth
  • Address
  • Driver’s license or passport ID number, as well as a picture of the ID

Businesses created after January 1, 2024, also have to submit information about the people who created the business—called company applicants—if they’re different from the current beneficial owners. 

FinCEN says there can be up to two company applicants: 1) the person who directly files the document that registers the company and 2) if more than one person is involved in the filing, the person who holds primary responsibility for directing the filing process. 

Who has access to BOI reports?

FinCEN is responsible for securely storing the BOI in a private database, but certain federal, state, local, Tribal, and international officials can obtain records if they submit a request and receive approval from FinCEN. Government officials can only request information for authorized activities related to national security, law enforcement, and intelligence matters. Financial institutions—and the regulators who oversee them—may also have access to BOI if they get approval from the reporting company. 

When do you have to submit your BOI report? 

Your BOI report submission deadline depends on when your business was formed. Here are the guidelines for reporting companies: 

  • If you created or registered your business to operate before January 1, 2024, you have until January 1, 2025, to file your report.
  • If you created or registered your business on or after January 1, 2024, you have 90 calendar days to file, starting from the day you receive notice that your registration went through.
  • If you create or register your business after January 1, 2025, you’ll have 30 calendar days to file after you receive notice that your registration went through. 

Though FinCEN doesn’t require annual reports, they do require businesses to update ownership information as it changes. That means if you move business locations or modify your ownership structure in any way, you have to file a new report within 30 days of the official date of the change. 

How do you file your BOI report? 

You can download, fill out, and submit your BOI report online through FinCEN’s BOI e-filing website. If you have questions or want to ensure accuracy, reach out to your business attorney or accountant for guidance. 

What happens if you make a mistake on the report?

If you realize you made a mistake or forgot to include key information on your report after filing it, you’ll have 90 days from the day you submit your report to correct any errors or omissions. Just log back onto FinCEN’s BOI e-filing website to access your report. 

What happens if you don’t comply with BOI reporting?

If you don’t comply with BOI reporting guidelines—by not submitting your report, providing false information, or refusing to correct or update your information—you could face serious penalties. 

If FinCEN determines that you willfully violate the BOI reporting requirements, you could be charged up to $500 each day past your reporting deadline. You may also be subject to up to two years of prison time and a fine of $10,000. 

The penalties are one of the main reasons the National Small Business Association (NSBA) has opposed the CTA and sued to delay compliance requirements. Other stated reasons for NSBA’s opposition include the perceived tedious reporting process and the fact that businesses already provide substantial ownership information to the banks they hold accounts with.  

Though the NSBA has amassed support from small business owners, the Treasury has given no indication that they’ll delay or update the BOI reporting requirements, and the policy seems settled for the foreseeable future.

Where can you get more information on BOI reporting compliance? 

FinCEN’s Small Entity Compliance Guide goes into detail on company exemption nuances, what constitutes substantial control of a business, and the ins and outs of the reporting process. 

What do the CTA and BOI report requirements mean for your business? 

To maintain compliance with the CTA, it’s crucial to be diligent about your reporting. Make sure you understand your business’s reporting deadline, set an alert on the calendar, and carve out time to complete and file your report. You may need to consult an attorney to ensure compliance and prevent penalties. 

You also need to stay on top of any changes to your ownership information that will require you to update your report. Think: if you switch business locations, change your business’s name, or restructure your ownership. 

Paige Smith Paige is a content marketing writer specializing in business, finance, and tech. She regularly writes for a number of B2B industry leaders, including fintech companies and small business lenders. See more of her work here:
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