Corporate Transparency Act & Beneficial Ownership Information Reporting: What Your Small Business Needs to Know

To combat fraud in the workplace, Congress authorized, and the president signed, the Corporate Transparency Act (CTA) of 2019. Several key provisions of that act go into effect on January 1, 2024, for millions of small businesses nationwide.

What goes into effect on January 1, 2024, for the Corporate Transparency Act?

Small businesses must file a Beneficial Ownership Information (BOI) Report with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). Following the passage of the CTA, FinCEN issued the regulation showcasing the details on who must file a report, when it has to be filed, and what information has to be reported.

Why does my business need to know about reporting requirements of the Corporate Transparency Act?

Reporting non-compliance can result in severe penalties for small business owners.

Why was the Corporate Transparency Act passed?

The overall goal of the CTA is to prevent money laundering. Congress stated in the act that perpetrators and criminals use a tactic that conceals their ownership of companies in the United States to facilitate illegal financial acts such as money laundering, financing of terrorism, tax fraud, and other criminal behavior.

According to Congress, this federal law provides for collecting beneficial ownership information needed to protect national interests and create a more viable way to combat money laundering.

Who must file a BOI report?

You must file a BOI report under the provisions of the law if you are a corporation, LLC, or similar entity created by the filing of official documents with your Secretary of State’s office or a similar office under the law of a state or Indian tribe. These are called “domestic reporting companies” for the CTA.

Some entities created in foreign countries and registered to do business in the United States must also file a BOI report. These are called “foreign reporting companies.”

Some small businesses can qualify for an exemption.

What businesses are exempt from filing a BOI report?

The law outlines 23 categories of entities exempt from the reporting requirement of the Corporate Transparency Act. Most of these exemptions are for entities already subject to substantial federal or state regulations.

Exempt businesses include, but are not limited to:

• Publicly traded companies and other entities that file reports with the SEC
• Banks, credit unions, and other financial institutions
• Money services businesses
• Insurance companies and state-licensed insurance producers
• Securities brokers and dealers
• Investment companies and advisers
• Accounting firms
• Pooled investment vehicles operated by banks, credit unions, and financial advisers
• Venture capital firm
• Public utilities
• Tax-exempt entities like 501(c)3 organizations
• Government agencies and authorities
• Subsidiary of certain exempt entities
• Large operating company with more than 20 full-time employees and a physical office in the United States that demonstrates more than $5 million in gross receipts or sales shown on a federal income tax return or information return

Who is a beneficial owner of my company?

A beneficial owner directly or indirectly has substantial control over the company. This person could also control at least 25 percent of the company’s ownership interests.

Who is a company applicant?

A company applicant is an individual who submits the documents that create the domestic reporting company. This person could also be the individual primarily responsible for directing or controlling the filing, such as an attorney or accountant, if multiple individuals are involved in the filing of the business creation documents. Company applicants could be the owner, CFO, and/or a designated person who helped incorporate the business.

What kind of information will I have to report under the CTA?

A domestic reporting company created before January 1, 2024, must report information about its beneficial owners. A domestic reporting company created on or after January 1, 2024, has to provide data about the company, its beneficial owners, and its company applicants.

These reports must include the entity’s:

• Full legal name
• Any trade or “doing business as” names
• Complete current street address of the principal place of business
• Jurisdiction of formation
• Taxpayer identification number

What information does each beneficial owner and company applicant need to submit?

Every beneficial owner and company applicant must submit the following information:

• Full legal name
• Date of birth
• Complete current residential street address, unless the company applicant registered the entity as part of the normal course of their business operations. Then that person would provide the street address of the business, i.e., the attorney’s office.
• Unique identifying number as well as the issuing jurisdiction from a current U.S. passport, state or local ID document, driver’s license, or if the individual has none of those, a foreign passport.
• An image of the document showing the unique identifying number, such as a photo from a smartphone or a scanned image.

For example, an attorney helped the company apply to become an official business during their normal business operations, so therefore they would use their business address and business name for the address if the attorney is required to disclose that information. However, if the attorney is an exempt business, they would not need to file as a company applicant.

When does my company need to file its initial BOI report?

If your company was created before January 1, 2024, you must file your initial BOI report no later than January 1, 2025.

If your company was created on or after January 1, 2024, you have 30 calendar days after the day you receive public notice that your company was officially formed to file your initial BOI report. So, if you receive notice your company was officially created on August 15, 2025, your first BOI report would be due on or before September 14, 2025.

What should I do if the reported information changes in the future?

If any information reported to FinCEN changes regarding your company or the beneficial owners, file an updated report within 30 calendar days after the change occurs. For example, your business moves to a new location or you add a second location on January 15, 2026. You have until February 14, 2026, to update your FinCEN report.

Information changes may include:

• Who the beneficial owners are
• If your company becomes eligible for an exemption
• Information that’s changed about the company or beneficial owners that is inaccurate from the previously submitted report

You do not need to update the information on the company applicants.

What if I find out my submitted BOI report contains an error?

If you filed an inaccurate report, you have 30 calendar days to file a corrected report after you become aware of the inaccuracy.

How do I submit my company’s BOI reports?

File your initial report and any updates through a secure system available on FinCEN’s website starting on January 1, 2024. There is no fee. You cannot submit your report before January 1, 2024.

Do I have to submit my information through the reporting company or as an individual?

You do not have to submit your information through your company’s documentation. You, another owner, or a company applicant can apply for a FinCEN Identifier. This process is similar to applying for a tax ID number through the IRS.

You must file an application with FinCEN containing all of the required information. Once approved, you can include the individual FinCEN Identifier in the reporting company, which will include that identifier in any BOI reports. As with company reports, individual FinCEN Identifiers must update their application within 30 days of any changes.

Individual identifiers can help with reporting efficiency if you own more than one company subject to BOI reporting requirements.

Who will have access to the information contained in the BOI report?

FinCEN has authorization to disclose information in these reports to:

• Federal agencies related to national security, intelligence, and law enforcement
• State law enforcement agencies with a court order
• The Treasury Department
• Financial institutions, with the company’s consent
• Government regulators of financial institutions
• Certain foreign authorities requesting information through a U.S. agency

What can I do now to prepare for BOI reporting?

You can do three things now to prepare for 2024’s reporting requirements.

1. The first step is determining whether your business is subject to the reporting requirement.
2. If your company must comply, the next step is to gather the information required by law to prepare for filing the initial report.
3. As noted, you will need to update the information contained in the reports periodically. We highly recommend creating a system that allows you to keep track of any changes in the reported information so you can submit the changes promptly.

We know you’re busy and don’t want to have to deal with more government red tape. But your company faces up to $10,000 in fines, or you could be jailed for two years for not complying with the Corporate Transparency Act.

If you require assistance, the experts at The Whitlock Co. can help. Request a consultation with us, and we can guide you through this regulatory process.