Small business owners will have yet one more thing on their to-do list now the Corporate Transparency Act (CTA) is in effect. 

Around 30 million small businesses will be impacted by the law, which establishes a federal database of the reporting companies that will be accessible to certain authorities and organizations.



To counter the risks allegedly posed by anonymous shell companies, the CTA creates a national registry that contains information about business entities. 

Effective January 1, 2024, the CTA requires that certain businesses disclose to the Federal government information about the company, its beneficial owners and the company applicant. 

Any company with twenty or fewer employees formed by filing paperwork with the Secretary of State or equivalent official—that is created or registered prior to January 1, 2024, has until January 1, 2025, to file an initial report; reporting companies created or registered after January 1, 2024 and before January 1, 2025, will have ninety days after creation or registration to file a report. Entities created on or after January 1, 2025 will have 30 days to submit the reports.

Small business organizations such as the National Small Business Association (NSBA) and the National Federation of Independent Businesses (NFIB) oppose the CTA, calling it cumbersome, intrusive, overly punitive, and unconstitutional. NSBA states that small businesses are unfairly impacted because they usually do not have compliance teams or staff attorneys. 

Eighty percent of the small businesses surveyed by NFIB are against the new reporting requirements, which NFIB claims are unclear. NFIB notes that each state has different standards and practices for business entity formation, potentially leading to uncertainty about whether a business must report. For example, some states require sole proprietorships and general partnerships to register with state agencies, while other states do not.

Reporting companies include corporations, limited liability companies, limited partnerships, professional associations, cooperatives, real estate investment trusts, and statutory trusts. 

Exemptions are large companies that are already subject to regulation. 

Three categories of information to be reported: company, owners, and applicant. 

Companies created before January 1, 2024 must provide information about the company and its beneficial owners.

• Beneficial owner is defined in the CTA as an individual who exercises “substantial control” over the reporting company or has an ownership interest of at least 25 percent. Company senior officers, directors, and others who make significant decisions. This statutory definition of “substantial control,” is broad enough to cause confusion. 

Companies created on or after January 1, 2024, must provide information about the company, its beneficial owners, and its company applicants. 

• A company applicant generally is the individual who files the formation document with state authorities for the reporting company. 

Technically, the information to be filed with FinCEN is called a Beneficial Ownership Information (BOI) Report. The following is what is required in the report for a company, an owner, and an applicant: 

• The reporting company must provide its name and any alternative (DBA) names, the address of its principal place of business, the state of formation, and its taxpayer identification number or FinCEN identifier. 
• Each beneficial owner of a reporting company must furnish their full legal name, date of birth, residential address, and an identification number from a driver’s license, passport, or other state-issued identification (ID), along with a copy of the ID document. 
• A company applicant is required to submit the same information as a beneficial owner. 

Who is allowed to access the information? 

• US federal, state, local, and tribal government agencies
• Foreign law enforcement agencies, judges, prosecutors, and other authorities
• Financial institutions
• Federal regulators
• US Department of the Treasury

The privacy implications of the CTA are obvious and enormous. Lawsuits challenging the CTA’s constitutionality, in part on privacy grounds over sharing “sensitive information” with the government have been filed. 

Penalties for noncompliance are steep. Willingly providing false information (including false identifying documents) or failing to report complete information, can result in: 

• Fines of $500 per day, up to $10,000
• Imprisonment for up to two years

Understanding how the CTA applies to you, how it will affect your business, and what you must do to comply introduces new burdens that you may have scarce resources to address. 

Terms like “beneficial owner” and “substantial control” may seem vague and confusing, further complicating compliance efforts. But compliance is critical for business owners who want to avoid possible sanctions.

We can help you determine whether the CTA applies to your business and the steps needed to meet it. With just months away from compliance, we encourage you to contact us now to start working on a CTA compliance strategy.