Small Business Legal Update: The Corporate Transparency Act (Revised October 2024)

What is the Corporate Transparency Act?

Starting January 1, 2024, the Corporate Transparency Act (CTA) requires corporations, limited liability companies (LLCs), limited partnerships, and any other business entities that were created in the United States by filing with a secretary of state or other similar office, to report ownership information to the federal government.

Specifically, the CTA requires these businesses to report their ownership information to the Financial Crimes Enforcement Network (FinCEN), which is in the Department of the Treasury. The annual report that needs to be filed with FinCEN is called a Beneficial Ownership Information (BOI) report.

Where Do Business Owners Need to File Their BOI Report?

Business owners need to file their BOI report here: https://boiefiling.fincen.gov/

Why Do Companies Have to Report Ownership Information Under the Corporate Transparency Act?

The purpose of the CTA is to combat money laundering and the funding of certain illegal activities such as terrorism, human trafficking, and fraud. By requiring certain business owners to report their ownership to the federal government, it will be harder to shelter assets in shell companies or other hidden companies.

What Businesses Are Exempt from the CTA Reporting Requirement?

There are 23 exemptions to the CTA.

These exempted entities that do not have to file a BOI report:

1. Securities reporting issuer
2. Governmental authority
3. Bank
4. Credit union
5. Depository institution holding company
6. Money services business
7. Broker or dealer in securities
8. Securities exchange or clearing agency
9. Other Exchange Act registered entity
10. Investment company or investment adviser
11. Venture capital fund adviser
12. Insurance company
13. State-licensed insurance producer
14. Commodity Exchange Act registered entity
15. Accounting firm
16. Public utility
17. Financial market utility
18. Pooled investment vehicle
19. Tax-exempt entity
20. Entity assisting a tax-exempt entity
21. Large operating company
22. Subsidiary of certain exempt entities
23. Inactive entity

We have highlighted two commonly exempted entities: tax-exempt entities, and large operating companies.

Note in particular, exemption number 21 to the CTA, is a large operating company.

What is a Large Operating Company under the CTA?

A large operating company is exempt from the Corporate Transparency Act’s reporting requirements. A large operating company must:

(1) employ more than 20 employees on a full-time basis (30+ hours per week) in the United States;
(2) report over $5 million in gross income on its previous year’s federal income tax return; and
(3) operate from a physical office in the United States.

If these three requirements are met, then a company is considered a large operating company, and thus is exempt from filing a BOI report with the federal government.

Do Sole Proprietors Have to File a Beneficial Ownership Information Report Under the Corporate Transparency Act?

No, sole proprietors do not have to file a Beneficial Ownership Information (BOI) report under the Corporate Transparency Act. Sole proprietors do not fall under the scope of the Corporate Transparency Act, because they have not registered as a business entity by filing with a secretary of state or other similar office.

When Do I Need To File my Beneficial Ownership Information Report with the Federal Government?

Businesses created before January 1, 2024, have 1 year, or until January 1, 2025, to file their Beneficial Ownership Information (BOI) report with the federal government.

If you create a new business in 2024, you will have 90 days from the creation of your new business to file your BOI report.

If you create a business in 2025, you will have 30 days from the creation of your new business to file your BOI report.

Where Do I File My Beneficial Ownership Information Report?

You will file your Beneficial Ownership Information (BOI) report on FinCEN’s website, which is available here: https://boiefiling.fincen.gov/

Can I Hire a Lawyer or My CPA to File My Beneficial Ownership Information Report?

Yes, you can have your lawyer or accountant file your BOI report for you. To have The Lipp Law Firm assist you with your BOI report filing, contact us here.

What Information Do I Have to Submit With My Beneficial Ownership Information Report?

You will need to report:

Your company’s legal name
Any trade names, such as “doing business as” (d/b/a)
The current address of your company’s principal place of business in the United States, or if you are a foreign company, the address where you conduct business in the United States
The state or jurisdiction where you formed or registered your company
Your Taxpayer Identification Number or Employer Identification Number (EIN)

For each beneficial owner of your company, you will have to report:

The owner’s name
Date of birth
Residential address
Identifying number from an identification document such as a U.S. driver’s license or passport, the state name or issuing jurisdiction name, and a copy of the identification document.

A beneficial owner is any individual that exercises substantial control over a company, indirectly or directly, or who owns or controls at least 25% of the ownership interests of the company.

What Are the Penalties for Not Filing a Beneficial Ownership Information (BOI) Report?

There are potential civil and criminal penalties for failure to file a BOI report.

Late filings are subject to daily penalties of $591, for each day that the failure to file continues.

There are also criminal penalties for willfully failing to file your BOI report, or for providing false or fraudulent information. Willful failures to file your BOI report, or reporting false information on your BOI report, could result in criminal penalties up to 2 years in jail, and fines of up to $10,000.

Get Help With Your Company’s Beneficial Ownership Information (BOI) Report

The Lipp Law Firm can assist your business with its BOI report filing. To get support, contact us here.