What Every Small Business Owner Should Know About The Corporate Transparency Act  

In 2021, Congress enacted a new law, the Corporate Transparency Act (“CTA”), which went into effect on January 1, 2024. The CTA was created to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures. It requires businesses, unless exempt, to report their Beneficial Ownership Information (“BOI”) to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). Willful failure to report the required information by the imposed deadline, may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000.

 As you can see, this law packs a punch; the government is not playing. A close review of the law reveals, that many small businesses will have to file a report. There are 23 exemptions to the filing requirement mostly dealing with banks and securities and insurance companies. However, there is one exemption for a “large operating company” but you need to meet an additional six criteria such as having 20 full time employees and at least $5,000,000 in gross receipts.

Consequently, small business owners are directly in the line of fire and cannot be complacent about the CTA. Here are somethings they need to know.

 1. A beneficial owner is any individual who, directly or indirectly, exercises substantial control over the business or owns or controls at least 25 percent of the ownership interests of the business. 

2. Beneficial ownership information consists of full legal name, date of birth, complete residential street address and acceptable ID. 

3. BOI reports must be filed electronically using FinCEN’s secure filing system.

 4. A business created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial BOI report.

 This is just a brief overview of the CTA. For a more details, FinCEN has resources for small business on its website. If you are still feeling overwhelmed and would like to schedule a CTA compliance session, feel free to contact us.