The Corporate Transparency Act 2024: What You Need to Know
With 2024 well underway, small business owners and entrepreneurs have some important new compliance requirements to tackle. One of the biggest changes this year is the Corporate Transparency Act (CTA), which introduces new reporting requirements for many small businesses, especially LLCs and S Corporations, as well as other reporting companies mandated to submit beneficial ownership information (BOI) reports.
If you own or run a small business, this blog explains the key details you need to know about this act, the deadlines for filing, and the penalties for non-compliance. Let’s dive into what this new law means and how you can easily meet its requirements.
What Is the Corporate Transparency Act?
The Corporate Transparency Act (CTA) is a new federal law requiring small businesses to submit Beneficial Ownership Information (BOI) to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).
The purpose of this law is to combat money laundering, prevent terrorist financing, and other illicit activities carried out through shell companies. While businesses already provide some of this information in state filings, the federal government wants a consolidated, national database of ownership to help law enforcement identify and track illegal financial activities.
If your business is small and legitimate—don’t worry. This process won’t be complicated, and we’ll walk through exactly what to do.
Who Needs to File a Beneficial Ownership Information Report?
The Corporate Transparency Act targets smaller businesses that aren’t already under significant regulatory scrutiny. Here’s a breakdown of who must comply and who is exempt:
- Required to File:
- LLCs and S-Corps
- Businesses with less than $5 million in revenue and under 20 employees
- Exempt from Filing:
- Sole proprietors (if no legal entity, like an LLC, is registered)
- Nonprofits
- Large corporations and publicly traded companies
- Banks and other financial institutions already regulated by federal authorities
New companies created after January 1, 2024, must submit details about their company applicants alongside their beneficial owners as part of compliance requirements.
Note: If you’re running an LLC or S-Corp, it’s highly likely this law applies to you—so keep reading to learn how to file your BOI report on time!
Exemptions
The Corporate Transparency Act (CTA) provides exemptions for certain types of entities from the beneficial ownership information reporting requirements. These exemptions are designed to exclude entities that are already subject to robust transparency and reporting requirements, or those that are not likely to be used for illicit activities.
Exempt Entities
The following types of entities are exempt from the CTA’s reporting requirements:
- Public Companies: Companies that are publicly traded on a national securities exchange, such as the New York Stock Exchange (NYSE) or NASDAQ, are exempt from reporting.
- Large Operating Companies: Companies with more than 20 employees and $5 million in annual gross receipts or sales are exempt from reporting.
- Investment Companies and Advisers: Investment companies and investment advisers registered with the Securities and Exchange Commission (SEC) are exempt from reporting.
- Subsidiaries of Exempt Entities: Subsidiaries of entities that are exempt from reporting, such as public companies or large operating companies, are also exempt from reporting.
- Non-Profit Organizations: Non-profit organizations that are exempt from taxation under section 501(c) of the Internal Revenue Code are exempt from reporting.
- Government Entities: Government entities, including federal, state, and local government agencies, are exempt from reporting.
Other Exemptions
In addition to the exemptions listed above, the CTA also provides exemptions for certain types of entities that are not likely to be used for illicit activities, such as:
- Dormant Companies: Companies that have been dormant for a period of at least 12 months and have not engaged in any business activity during that time are exempt from reporting.
- Companies in Bankruptcy: Companies that are in bankruptcy proceedings are exempt from reporting.
Reporting Requirements for Exempt Entities
While exempt entities are not required to submit a beneficial ownership information report, they may still be required to maintain records of their beneficial ownership information. These records must be made available to the Financial Crimes Enforcement Network (FinCEN) upon request.
Important Takeaways
The Corporate Transparency Act provides exemptions for certain types of entities from the beneficial ownership information reporting requirements. These exemptions are designed to exclude entities that are already subject to robust transparency and reporting requirements, or those that are not likely to be used for illicit activities. However, even exempt entities may still be required to maintain records of their beneficial ownership information and make them available to FinCEN upon request.
What Information Do You Need to Provide?
Filing your Beneficial Ownership Information (BOI) report will only take a few minutes. Businesses need to report information about their beneficial owners to comply with the Corporate Transparency Act. Here’s what you’ll need to submit:
- Owner Names
- Identifying information (like a passport or driver’s license)
- Addresses of owners
- Business control information (who has substantial control in the company)
Who is considered a beneficial owner?
- Any person who owns 25% or more of the company
- Anyone with substantial control over the company, such as key decision-makers (even if they own 0%)
If ownership is complex—such as ownership through a trust or IRA—you may need to consult additional resources on FinCEN’s website to ensure compliance.
Deadlines for Filing
The deadlines for submitting your BOI report vary depending on when your business was registered:
- Existing businesses (registered before January 1, 2024): You have until December 31, 2024 to submit your BOI report.
- New reporting companies created (registered on or after January 1, 2024): You must file the report within 90 days of registration.
- New businesses starting in 2025 or later: The deadline for filing is 30 days from registration.
Penalties for Non-Compliance
Failing to file your BOI report—or submitting incorrect information—can lead to serious penalties:
- Civil penalties: Up to $500 per day until the report is submitted
- Criminal penalties: Fines of up to $10,000 and up to two years in jail for willfully providing false information or failing to comply
The Corporate Transparency Act aims to prevent tax fraud by ensuring accurate reporting of beneficial ownership information.
While it’s unlikely that most small businesses will be aggressively pursued, it’s better to be safe and file your report early to avoid any fines or headaches later.
How to Stay Compliant
If you’re an existing business, mark December 31, 2024 on your calendar to ensure you submit your BOI report before the deadline. If you’re starting a new business, include the BOI report in your list of essential tasks to complete during setup, just like filing for your LLC.
Additionally, remember that any changes to your business ownership or addresses need to be updated with FinCEN within 30 days to stay compliant.
Summary
The Corporate Transparency Act is a new requirement designed to prevent crime, but for most small business owners, it’s simply a quick compliance task. By filing your BOI report on time and ensuring any changes are reported promptly, you’ll avoid penalties and stay in good standing with federal regulators.
It is crucial to report accurate information about beneficial owners to avoid legal implications and potential penalties for non-compliance with the CTA.
Make sure to file your report early, and don’t forget to check out the official resources on FinCEN’s website for FAQs and filing instructions.
Resources for Small Business Owners
Inventory Management Worksheet: Inventory Worksheet
BOI (Beneficial Ownership Information) form: https://www.fincen.gov/boi
More BOI reference materials: https://www.fincen.gov/boi/Reference-materials
Annual Planning Guide: Annual Planning Guide
Profit & Loss Template and Dashboard: P&L Dashboard
This transcript is generated from audio and may contain minor errors or inconsistencies compared to the spoken content.
Hello, hello everyone! Jamie Trull here, your favorite CPA and financial literacy coach. Today we’re talking about something really important—new reporting requirements for 2024 and beyond.
If you’re a small business owner running an LLC or S-Corp, listen up! There’s a new law you’ll need to comply with, and it’s one that isn’t being talked about much. Ignoring it could lead to hefty penalties, so it’s essential to understand what’s happening.
Overview of the Corporate Transparency Act
This new law is the Corporate Transparency Act (CTA). Although Congress passed it a few years ago, it’s now coming into effect for 2024. The law requires businesses to file Beneficial Ownership Information (BOI) reports.
So, what is BOI? It’s simply information about who owns and controls your company. I know some of you may be wondering, “Don’t we already report this information in our annual state filings?”
Yes! But now, the federal government, through FinCEN (the Financial Crimes Enforcement Network), is collecting it directly.
The goal of this law is to prevent money laundering and criminal activities carried out through shell companies.
There’s been a lot of noise about this being an invasion of privacy, but really, this is information we already report elsewhere—just consolidated into one place for the federal government to access when needed.
Why the Corporate Transparency Act Was Created
The purpose of the CTA is to crack down on criminal activities, such as money laundering or terrorism financing.
Think about it like the show Ozark—remember how Marty Bird used shell companies to move money around for the cartel?
Well, the idea here is to make that harder to do by requiring transparency around who truly owns and controls a company.
Most of us don’t need to worry. If you’re running a normal small business, this will take you just a few minutes to file—so you can comply and get it over with.
Who Needs to File a BOI Report?
Not every business needs to file. Here’s a quick breakdown:
Required to File:
- Small businesses like LLCs and S-Corps
- Companies with less than $5 million in revenue and fewer than 20 employees
Exempt from Filing:
- Sole proprietors with no formal business entity
- Nonprofits
- Banks, large corporations, and publicly traded companies
So if you’ve registered an LLC or S-Corp, it’s likely this law applies to you.
What Information Needs to Be Reported?
Filing your BOI report will take just a few minutes. Here’s what you’ll need to provide:
- Names of beneficial owners
- Identification (passport or driver’s license)
- Addresses of beneficial owners
- Control information (who makes decisions or has significant control over the company)
Who Qualifies as a Beneficial Owner?
- Anyone with 25% or more ownership of the company
- Anyone with substantial control, even without ownership
So, even if someone has 0% ownership but controls key decisions, they’re considered a beneficial owner and must be reported.
When Do You Need to File?
The filing deadlines depend on whether you’re an existing or new business:
- Existing businesses (as of January 1, 2024): File your BOI report by December 31, 2024.
- New businesses in 2024: File within 90 days of registration.
- Businesses registered in 2025 or beyond: File within 30 days of forming your entity.
Once you’ve filed, you also need to report any changes (like ownership changes or address updates) within 30 days.
What Are the Penalties for Non-Compliance?
If you miss the filing deadline, the penalties can be steep:
- Civil penalties: Up to $500 per day until you file
- Criminal penalties: Fines of $10,000 and up to two years in jail for willfully failing to file or providing false information
While I doubt they’ll aggressively go after every business, it’s better to stay on top of compliance and avoid these penalties altogether.
Summary
The Corporate Transparency Act is all about transparency and preventing financial crimes. For most small business owners, it’s simply a quick administrative task—nothing to be worried about, but something you should get done early.
If you’re already running a business, be sure to file your BOI report by December 31, 2024. If you’re just starting a business, add this to your checklist and file within 30 days of registration.
Resources to Help You Stay Compliant
- BOI (Beneficial Ownership Information) form: https://www.fincen.gov/bo
- More BOI reference materials: https://www.fincen.gov/boi/Reference-materials
- Annual Planning Guide: Plan Your Year Here
- Profit & Loss Template and Dashboard: Check It Out Here
- Inventory Management Worksheet: Get Yours Here
Thanks so much for joining me! Make sure to like this post, subscribe, and stay compliant with these new regulations. You’ve got this!
