Despite Litigation, Small Businesses Must Comply with Transparency Act

Under the Corporate Transparency Act (CTA)

Beginning January 1, 2024, the Corporate Transparency Act (CTA) imposed new disclosure requirements on businesses. The CTA requires most businesses to report information about the owners of the business to the Treasury’s Financial Crimes Enforcement Network (FinCen). Below are some of the highlights of this new law.

The CTA requires corporations, LLCs, LLPs and other entities formed by filing a document with a Secretary of State to file a Beneficial Ownership Information (BOI) report with FinCEN, unless the entity qualifies for an exemption. Entities that are not exempt from the CTA are called “domestic reporting companies”.

There are many different types of businesses that are exempt from filing under the CTA. Most of these exemptions apply to businesses that already have significant federal or state reporting obligations. Entities that are exempt include publicly traded companies, banks, credit unions, insurance companies and securities brokers. There is also an exemption for large operating companies that (i) have more than 20 full-time employees, (ii) have an operating presence in the U.S., and (iii) have sales exceeding $5 million.

For entities created before January 1, 2024, the BOI report must include information about the business and its beneficial owners. For entities created on or after January 1, 2024, the BOI report must also include information about the entity’s applicants.

The BOI report must include certain information about the entity’s “beneficial owners”. Beneficial owners include anyone who, directly or indirectly, either owns or controls 25% or more of the entity or who exercises substantial control over the entity. The information reported to FinCEN for each beneficial owner must include their name, date of birth, address and a photograph of a government issued ID.

For entities formed before January 1, 2024, the initial BOI report must be filed by January 1, 2025. For entities formed after January 1, 2024, the initial BOI report must be filed with 90 days of the entity’s creation. If the information reported on a BOI report changes, an updated report must be filed with 90 days.