Corporate Transparency Act: Reporting Requirements for Small LLCs and Corporations

The Corporate Transparency Act (CTA) is federal legislation that requires LLCs and corporations with fewer than 20 employees to start reporting ownership information to the federal government beginning in 2024. Here are details that may apply to your small business.

As the owner of a limited liability company (LLC) or a corporation with few or no employees, you may want to zone out when you hear news about the Corporate Transparency Act (CTA). The name of the legislation makes it sound like it should apply to big corporations, not small businesses. Furthermore, the CTA is intended to help stop money laundering and other fraud. And the rule to implement the legislation came from the Financial Crimes Enforcement Network. So, the law shouldn’t concern your small business. Right?

Wrong.

In fact, LLCs and corporations with fewer than 20 employees are specifically targeted by the Corporate Transparency Act. Here’s what you need to know:

What is the Corporate Transparency Act?

The Corporate Transparency Act is a law that requires millions of the nation’s smallest business entities to report beneficial owner information (BOI) to the Financial Crimes Enforcement Network (FinCEN) starting in 2024. (FinCEN is a bureau of the U.S. Department of the Treasury.) See the filing deadlines for the Corporate Transparency Act here.

What is a beneficial owner?

According to FinCEN, the term “beneficial owner” includes any individual who, directly or indirectly, either

• exercises substantial control over a reporting company (i.e., can make important decisions for the company)

or

• owns or controls at least 25 percent of the ownership interests

See our page on the full definition of a beneficial owner.

Which businesses will need to file BOI reports?

Small businesses that match these criteria will be required to file BOI reports:

• Have 20 or fewer full-time employees and less than $5 million in sales

and

• Are LLCs, limited liability partnerships, corporations, business trusts, or other entities created by filing with a secretary of state, tribal jurisdiction, or similar office (see limited liability partnerships definition)
• Foreign LLCs and corporations that are registered to do business in any state or tribal jurisdiction

Organizations with more than 20 full-time employees and over $5 million in annual gross receipts are excluded from reporting requirements.

It’s estimated that about 30 million existing businesses and 5 million new companies formed annually over the next decade will be required to report beneficial ownership information.

What’s the purpose of the CTA?

The law was enacted because “illicit actors” often set up small LLCs and corporations as shell companies or fronts to hide the identities of owners who are engaged in money laundering, financing terrorism, and other illegal activities.

According to a notice published in the Federal Register, collecting beneficial ownership information at the time of company formation will significantly reduce the amount of time currently required to research who is behind anonymous shell companies. (Existing companies will have to file ownership reports, too.)

Most state and tribal-level jurisdictions don’t require a business to disclose beneficial owner information at the time the business is formed or afterward. Additionally, most states don’t require much, if any, contact or other information about an entity’s officers or other people who control the entity.

That can make it difficult and costly for the government to obtain information about those owners when necessary. Collecting owner information in a centralized federal database is a step to help alleviate that problem.

What information about the owners has to be reported?

Companies will have to identify the following information for the entity:

1. Full legal business name
2. Any trade names
3. Principal business address
4. State, tribal, or foreign jurisdiction of formation
5. Taxpayer Identification Number (TIN) – This can be an Employer Identification Number (EIN), Individual Taxpayer Identification Number (ITIN), or Social Security number (SSN)

They would then report these four pieces of information about each of the beneficial owners:

1. Full legal name
2. Any “doing business as” (DBA) name
3. Birthdate
4. Unique identifying number and issuing jurisdiction from an acceptable identification document (and the image of such document). An example might be a driver’s license number and an image of the license.

If an individual provides their four pieces of information to FinCEN directly, the individual may obtain a “FinCEN identifier,” which can then be provided to FinCEN on a BOI report in lieu of the required information about the individual. 

FinCEN Identifiers

A “FinCEN identifier” is a unique identifying number that FinCEN will issue to an individual or reporting company upon request after the individual or reporting company provides certain information to FinCEN. An individual or reporting company may only receive one FinCEN identifier.

When an individual who is a beneficial owner or company applicant has obtained a FinCEN identifier, reporting companies may report the FinCEN identifier of that individual in the place of that individual’s otherwise required personal information on a beneficial ownership information report.

An individual or reporting company is not required to obtain a FinCEN identifier.

Not sure what FinCEN is? Check out this FinCEN definition page.

Company Applicant Reporting Requirement

In addition to reporting company ownership information, companies created after January 1, 2024, will need to submit the same four pieces of information for the “company applicants.” The term company applicant is defined as:

• An individual who directly files the document that creates the entity, or in the case of a foreign reporting company, the document that first registers the entity to do business in the United States.
• An individual who’s primarily responsible for directing or controlling the filing of the relevant document by another.

Companies that were already in existence or registered before January 1, 2024, won’t have to file reports for company applicants.

This means a ZenBusiness employee who completes your filing is the Company Applicant. ZenBusiness will be providing that employee’s FIN to you so you can complete your report.

What will it cost?

There are no costs associated with filing directly with FinCEN. If you opt to use a third-party service to file your report, that third party will indicate the cost of its service.

Who will have access to the data?

FinCEN is developing a secure, non-public database called the Beneficial Ownership Secure System (BOSS) to receive and store BOI data. To maintain security and confidentiality, there will be limitations on who can obtain the data and for what purposes. As an example, the Federal Register notes, “Federal agencies…may only obtain access to BOI when it will be used in furtherance of a national security, intelligence, or law enforcement activity.”

When do companies have to submit BOI reports?

The regulations went into effect on January 1, 2024. Companies that were created or registered before January 1, 2024, have until January 1, 2025, to file their initial reports. Companies created or registered after January 1, 2024, but before January 1, 2025, will have 90 days after creation or registration to file their initial reports. Starting in January 2025, newly registered companies will have 30 days to file a BOI report.

If there’s a change in beneficial owner information after the initial report is filed, a company will have to file an update within 30 days of the change.

Filing your BOI report is currently optional. We’re here to help you file securely and accurately if you choose to file.

Where can I find the form to report?

The form to report beneficial ownership information can be found on FinCEN’s BOI webpage (linked in the resources below). To make things easy, we can also guide you through the process and take care of the filing for you. Visit our Beneficial Ownership Information (BOI) page to learn more.

Additional Resources

• FinCEN BOI homepage: https://www.fincen.gov/boi
• BOI Compliance Guide: https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide_FINAL_Sept_508C.pdf
• FinCEN FAQ: https://www.fincen.gov/boi-faqs#M_3
• State Requirements for Beneficial Ownership Reporting
• BOI Filing for LLCs: Guide to Beneficial Ownership Reporting
• BOI Filing for Small Businesses

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.