Corporate Transparency Act and Beneficial Ownership Information Reporting Requirement

The Corporate Transparency Act (CTA) was passed in 2021 under the National Defense Act in an effort to reduce money laundering and other financial crimes. It requires most small businesses to provide information about owners and decision makers (i.e. “Beneficial Ownership Information” (BOI)) to the Financial Crimes Enforcement Network (FINCEN). This will apply to most of our clients.


Who must file a BOI report with FINCEN?

This legislation specifically targets the smallest of companies. It applies to C or S corporations, most partnerships, and LLCs – including single member LLCs. There is a long list of exemptions, which primarily apply to large companies that are already heavily regulated by the federal government. The exemption that could apply to your small business is if the business has more than 20 employees, reported greater than $5M of revenue on their last income tax return, and has a physical presence in the U.S. Outside of that exception, we expect every taxpayer we work with who owns or controls or directs an LLC, corporation, or partnership to have to file one of these before December 31, 2024.


When must companies file?

There are different filing timeframes depending on when an entity is registered/formed or if there is a change to the information last reported.

  • New entities (created/registered in 2024) — must file within 90 days
  • New entities (created/registered after 12/31/2024) — must file within 30 days
  • Existing entities (created/registered before 1/1/24) — must file by 1/1/25
  • Reporting companies that have changes to previously reported information or discover inaccuracies in previously filed reports — must file within 30 days


What are the consequences of not filing a timely report?

Civil penalties of $591 per day can be assessed under the CTA. This would be over $17,000 for being late by one month! Criminal penalties of up to 2 years in prison and a $10,000 fine can be assessed as well in criminal situations.


What must be reported to FINCEN?

The reporting company will report basic information about the business including name, any DBAs, address, state of formation, and tax ID number (EIN).

Additionally, information on the "beneficial owners" of the entity and for newly created entities (post 12/31/2023), the company applicant(s)[1] of the entity is required. This information includes — name, birthdate, address, a unique identifying number and issuing jurisdiction from an acceptable identification document (e.g., a driver’s license or passport) and an image of such document.


Who is a "beneficial owner"?

Any individual who, directly or indirectly, either:

  • Exercises “substantial control” over a reporting company, or
  • Owns or controls at least 25 percent of the ownership interests of a reporting company

An individual has substantial control of a reporting company if they direct, determine or exercise substantial influence over important decisions of the reporting company. This includes any senior officers of the reporting company, regardless of formal title even if they have no ownership interest in the reporting company.

“Ownership interests” generally refer to arrangements that establish ownership rights in the reporting company, including simple shares of stock, LLC units, as well as more complex instruments.


Take action now!

Consider and file your BOI reports today! FinCEN has published a couple very helpful (but lengthy) supporting documents: an FAQ and a Small Entity Compliance Guide.

As always, feel free to reach us anytime to discuss BOI reporting under the CTA. We will be happy to prepare these reports for our clients in most cases as a separate service. Some situations may require consultation with your business attorney, but the majority of them will not.


[1] A company applicant is an individual who files the document that creates the entity or that first registers the entity to do business in the U.S., and/or the individual primarily responsible for directing or controlling the filing of such document.