Corporate Transparency Act Compliance for Small Business

What is the Corporate Transparency Act: 

• Law aimed at curbing illicit financial activity. Passed in 2021 as part of National Defense Authorization Act
• “Know your customer” requirements for banks --  This is basically the same thing, for small business owners – for the same purpose.

Terms to know:

• FinCEN – Financial Crimes Enforcement Network – Office in Dept. of Treasury.
• Beneficial Owners, or “Beneficial Ownership” – someone who has 25% or more ownership interest in a company or someone who exercises substantial control over the company.
• Beneficial Ownership Information Report (BOIR).

What Companies Must Report?

• Small businesses that are created by filing a document with secretary of state or any similar office.
• 23 Types of exemptions. 
• Any financial institution, stock brokerage, insurance company, or finance company that already has to fulfill “know your customer” reporting.
• Non-Profits.
• Incorporated entities that employ over 20 people and have over $5 million gross receipts.
• Small business members of the National Small Business Association as of 3-1-24

When do companies report?

• Companies started before this year have until January 1, 2025 to file BOIR.
• Companies started this year have 3-months after formation to file BOIR.
• Reports must be updated within 30 days of ANY changes.

What do companies report?

• Name of Company
• Trade name or Doing Business As
• Address
• Tax ID Number

What do Beneficial Owners report?

• Name; Date of Birth; Address
• Proof through Govt. Issued ID

Interesting Tidbits:

• If a beneficial owner doesn’t want to have the person who is reporting for the company know their information, that Beneficial Owner can apply for a FinCEN ID.
• Creditors are not Beneficial Owners.
• Third party providers can file BOI report on the company’s behalf.
• Update filings w/in 30 days of any change.
• Fines as high as $10K and 2 yrs. in jail.
• Not an annual reporting requirement. If no changes, don’t have to refile.
• There is NO FILING FEE.

Resources:

• CO-- https://www.uschamber.com/co/start/strategy/how-to-file-beneficial-ownership-report
• FinCEN FAQs (updated April 18, 2024): https://www.fincen.gov/boi-faqs
• To File BOI Report: https://boiefiling.fincen.gov/boir/html