As of January 1, 2024, the new Corporate Transparency Act (CTA) requires virtually all entrepreneurs and small businesses in the United States to complete a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN).
Not sure what to do? Don’t panic! We’re here to help you navigate the ins and outs of the 2024 Corporate Transparency Act, from filing to exemptions and more!
What is the Corporate Transparency Act?
The CTA, which started as a bill in 2019 and launched in 2021, requires most small businesses to report information about the business owners. The Act defines owners as those who:
- Have control over a business or limited liability company
- Own 25% or more of the company’s interest
- Gain economic benefits from a company’s assets
The purpose of the Corporate Transparency Act is to help FinCEN thwart bad actors who might use a business entity status like an S-Corp or LLC (limited liability corporation) to disguise other operations or engage in tax evasion or money laundering.
Who Has to File a BOI, and When
Most small businesses must file a BOI (Beneficial Ownership Information) report to comply with the CTA.
According to the BOI Small Compliance Guide, if your business launched before January 2, 2024, you must file the report by January 1, 2025.
If you started your business after January 1, 2024, you have 90 calendar days to file after you’ve received actual or public notice that the organization’s creation or registration is effective.
Suppose you launch your business on or after January 1, 2025. In this case, you’ll have just 30 calendar days to file after you’ve received actual or public notice that the organization’s creation or registration is effective.
Once filed, if your business experiences ownership changes, you have 30 days to revise your BOI report.
What Happens If You Don’t File a BOI?
Unless your business is exempt, the BOI Small Compliance Guide says if you don’t file a report or you give false information, you could face a $500 fine for every day the violation occurs, up to two years of prison time, or a fine of up to $10,000.
The guide also offers checklists for each exemption type to determine whether you file a BOI report or not. And if you file a BOI report and your company becomes exempt after filing, you must file a new report identifying your business and checking a box noting its exempt status.
How to File a BOI Report
The real question business owners often have is: How do I file with the CTA? The process is pretty straightforward. You simply file a BOI electronically via FinCEN’s website. If you can’t file online, complete FinCEN’s contact form.
Mimi Nguyen, co-founder of Vietnamese coffee company Cafely in Nevada, described her filing experience as “pretty straightforward.”
“[FinCEN has] all the forms and instructions you need to get it done without too much hassle. You gotta [file] when you start up and then update [the BOI report] regularly. It’s a bit of paperwork, sure, but hey, it’s a small price to pay for a cleaner business environment.”
Who’s Exempt From the Corporate Transparency Act?
The BOI Small Compliance Guide lists 23 company types considered CTA exemptions, meaning they won’t have to file a BOI report. Some of these businesses include:
- Sole proprietorships
- Businesses with more than 20 employees
- Banks
- Government authorities
- Credit unions
- Insurance companies
- Accounting firms
- Tax-exempt organizations
- Large operating companies
- And more
Note: As of this update, the Corporate Transparency Act is in effect, though it is starting to see challenges in the courts, with some early rulings against the Act. While this may result in members of some organizations being temporarily or permanently exempt from compliance, most small business owners and entrepreneurs in the United States need to comply by the determined deadlines.
What Small Business Owners Are Saying About the CTA
Cache Merrill, founder of software development consultancy Zibtek in Utah, viewed CTA as a way to ensure small businesses avoid shady activities like money laundering, terrorism acts, and more.
“For small businesses, it’s crucial to view compliance not as a burden but as an opportunity to contribute to a more accountable and transparent operational environment. Staying informed and proactive in compliance can also mitigate potential disruptions and ensure smooth business operations.”
Nguyen described how this compliance instills trust in her customers, saying:
“Transparency isn’t just a legal requirement. It’s good business practice. When you’re upfront and honest with your customers and stakeholders, you build trust, and that’s invaluable in today’s competitive marketplace.”
On the other hand, Ratkowski of Franklin Landscaping Solutions in Tennessee, viewed CTA as another overwhelming obstacle.
“As a small business owner, [CTA] feels like just another hurdle in a never-ending steeplechase orchestrated by regulations. Suddenly, we’re lumped in with big corporations under the guise of transparency, but at what cost? Yes, transparency and combating illicit financial activities are important, but let’s find a balance that doesn’t stifle the very backbone of our economy. It’s not just about compliance. It’s about survival in an already challenging business landscape.”
Frequently Asked Questions (FAQs)
How Does the Corporate Transparency Act Affect My Business?
Any U.S. business with 1-20 employees that is not otherwise exempt from the Corporate Transparency Act must file a BOI report with FinCEN by January 1, 2025. Small businesses launched after January 1, 2024, have 90 days to file, and businesses started from January 1, 2025, and later have just 30 days to file.
Who Is Exempt From the Corporate Transparency Act?
The BOI Small Compliance Guide says sole proprietorships, companies with more than 20 employees, credit unions, accounting firms, insurance companies, tax-exempt organizations, and 20 other company types are all exempt from the CTA.
When Is My Filing Deadline?
Deadlines for filing a BOI to comply with the Corporate Transparency Act vary based on when the business is launched:
- Those launched before January 2, 2024, must file the report by January 1, 2025
- Businesses started after January 1, 2024, have 90 calendar days from the date of launch to file
- Companies started on or after January 1, 2025, have 30 calendar days to file
- Businesses with changes to ownership or entity (e.g., going from sole proprietor to LLC or SCorp, etc.) have 30 days to file or revise reports
What Happens If I Don’t File a BOI?
If you don’t file a BOI report or file false information, you either receive:
- A $500 fine for every day the violation occurs
- Up to two years of prison time
- A fine of up to $10,000
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