Effective January 1, 2024, the Corporate Transparency Act (CTA) establishes a new filing requirement for small business. Qualifying businesses must file a Beneficial Owner Information (BOI) report with Financial Crimes Enforcement network (FinCEN), a bureau under the Department of Treasury.

According to the bureau’s website, the expectation is that nearly all small businesses will meet the criteria and must file (Beneficial Ownership Information Reporting Rule Fact Sheet | FinCEN.gov).

The CTA details 23 exemptions from filing a BOI report. Notably exempt are “large operating companies” defined as any entity that “(a) employs more than 20 full-time employees in the U.S., (b) has filed a federal tax return or, if applicable, consolidated federal tax return recording more than $5 million in gross receipts or sales in the previous year and (c) has an operating presence at a physical office in the U.S” (FinCEN’s Proposed Rule: The Who, What and When of Beneficial Ownership Reporting under the CTA |… (williamsmullen.com))

Information on the reporting company itself that must be disclosed in the BOI report filing:

  • Full name of the reporting company
  • Any trade name or ‘doing business as’ name of the reporting company
  • Business street address of the reporting company
  • State or Tribal jurisdiction of formation of the reporting company
  • IRS TIN of the reporting company

And for each beneficial owner identified, the reporting company must provide:

FinCEN defines “beneficial owner” as “any individual who, directly or indirectly, either (1) exercises substantial control over a reporting company, or (2) owns or controls at least 25 percent of the ownership interests of a reporting company”.

Entities registered before January 1, 2024 have one year to file initial reports. Entities registered after 1/1/24 will have 30 days from notice of registration to file. Penalties for reporting violations are severe, reaching up to $10,000 in fines and up to 2 years imprisonment for criminal violations.