One of the biggest legislative changes affecting small business in 2024 and future years is the Corporate Transparency Act (CTA). Here is a list of answers to questions that business owners might have about the (CTA)
What is corporate transparency act? The CTA was passed by congress back in 2021, to combat money laundering, tax fraud, and other illicit activities. This law requires that certain entities submit a beneficial ownership information (BOI) report to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Treasury Department.
Who does it affect? Companies required to report BOI are called reporting companies. There are two types of reporting companies:
- Domestic reporting companies are corporations, limited liability companies, business trusts, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
- Foreign reporting companies are entities (including corporations and LLC) formed under the law of a foreign county that have registered to do business in the United State by the filing of a document with a secretary of state or any similar office.
There are 23 entity types that are exempt from reporting. See list below from FinCEN's website.
Please visit
BOI Small Compliance Guide v1.1 (fincen.gov) before determining if your entity is exempt.
What is reported on the BOI? The report will generally disclose the following information about the reporting company and the beneficial owners.
Reporting Companies - Full legal name
- Trade name under which is does business
- Current address
- Its state or tribal jurisdiction of formation
- Federal taxpayer identification number
Beneficial Owners - Full legal name
- Date of birth
- Address
- Unique identifying number (SSN)
- Drivers' license or passport
How to file? The beneficial ownership information report can be filed electronically through FinCEN's website.
When to file? According to FinCEN A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial beneficial ownership information report.
A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company's creation or registration to file its initial BOI report. This 90-calendar day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.
Reporting companies created or registered on or after January 1, 2025, will have 30 calendar days from actual or public notice that the company's creation or registration is effective to file their initial BOI reports with FinCEN.
How often are BOI's required to be filed? The BOI is not a recurring filing requirement; however, you will be required to file an updated report no later than 30 days after there is a change to any of the previously reported information. Here are a few examples of changes that would require an updated BOI:
- Registering to do business as a different name
- Change in ownership
- New CEO
- Change in address
- Owner receives new driver's license
Noncompliance with BOI can lead to significant penalties. Business owners will need to carefully analysis all active and inactive entities to determine if they have a filing requirement. This is a legal matter and any questions should be directed to a trusted legal professional.
