What Small Businesses Need to Know About the Transparency Act

To fight financial crimes and increase transparency, the federal government recently rolled out the Corporate Transparency Act (CTA). This new legislation requires many businesses to report information about their ownership structure—and failing to do so could land you in hot water. If this is news to you, fear not. We’ll walk you through all the most important details here.

What Is the CTA?

In January 2024, the federal government passed legislation requiring most small and medium-sized businesses to report “beneficial ownership” to the United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).

Who is a Beneficial Owner?

According to CTA guidelines, “beneficial owners” are individuals who directly or indirectly:

• Exercise control over the business
• Have the authority to appoint or remove senior officers and board of directors
• Have substantial influence over the company’s essential decisions
• Or have any other type of significant control over the company.

Do I Need to Report?

Domestic companies, such as corporations, LLPs, and similar companies created by filing documents with a state office must report. Additionally, foreign companies privately formed in other countries but registered to conduct business in the United States must also report.

Who is Exempt from Reporting?

Exempt businesses include banks, credit unions, insurance companies, public accounting firms, and any large company that meets all of the following criteria:

• Have more than 20 full-time employees working in the United States
• Filed tax returns showing over $5 million in gross receipts in 2023
• Have a physical office in the States

Why Does the CTA Exist?

The purpose of the CTA is to make it more difficult for criminals to launder money, traffic drugs, fund terrorism, or use anonymous business ownership to commit criminal activity.

When is the Filing Deadline?

• If your company was formed before January 1, 2024, you have until January 1, 2025 to file.
• If your company was formed after January 1, 2024, you must file within 90 days of registering your company with the state office or by January 1, 2025—whichever comes first.

What Happens if I Don’t File?

Failure to comply or providing false information comes with hefty fines and civil penalties.

These may include a daily $500 fine up until the point at which business owners file. There are other risks of criminal penalties, including a $10,000 fine and up to two years in prison.

What are the Reporting Requirements?

Qualifying small businesses must report:

• The legal name of the business
• The business address
• The state or jurisdiction where the business was formed and registered
• The taxpayer ID number and an identity document, such as a filed Articles of Incorporation or Organization

Corporate entities must include the above information + all of the following information about any other beneficial owners:

• Full name and birth date
• Home address
• Photocopy of an American driver’s license or passport

To file your report online, visit FinCEN.

Confused About CTA Requirements? We Can Help!

If you feel like the Corporate Transparency Acts just added a new layer of complexity to your life, go ahead and hand your stress over to us. With over a decade of experience serving restaurants and hospitality businesses, our accountants, bookkeepers, and CFOs understand your unique needs. We’ll ensure maintaining CTA compliance is as seamless as it is stress-free. Contact us today!