What is the Corporate Transparency Act? A Plain-English Guide

The Corporate Transparency Act (CTA) is a new federal law that requires most small businesses to report their ownership information to the government. If you're a business owner wondering what this means for you, let's break down this law into clear, understandable terms.

Quick Overview

Passed in 2021 and taking effect January 1, 2024, the Corporate Transparency Act requires most U.S. businesses to report their owners' information to FinCEN (Financial Crimes Enforcement Network). Think of it as creating a searchable database of who owns which companies in America.

Why Was This Law Created?

The Problem It Solves

For years, criminals have used anonymous shell companies to hide illegal activities like:

• Money laundering
• Tax evasion
• Fraud
• Other financial crimes

The Solution

The CTA creates transparency by requiring companies to disclose their true owners. This makes it harder for criminals to hide behind anonymous business structures while keeping things straightforward for legitimate businesses.

What Does the CTA Actually Do?

Creates New Requirements

• Mandates beneficial ownership reporting
• Establishes a secure federal database
• Sets clear filing deadlines
• Creates update requirements

Defines Important Terms

• Beneficial Owners: People who own or control companies
• Company Applicants: Those who file business formation documents
• Reporting Companies: Businesses that must file

Who Needs to Comply?

Most Small Businesses, Including:

• Limited Liability Companies (LLCs)
• Corporations
• Limited Partnerships
• Business Trusts
• Most other registered business entities

Key Exemptions:

• Companies with 20+ full-time employees and $5M+ in sales
• Heavily regulated entities (banks, credit unions)
• Tax-exempt organizations
• Inactive companies

What Information Must Be Reported?

Company Information:

• Legal business name
• Trade names (DBAs)
• Business address
• Formation state
• Tax ID number

Owner Information:

• Full legal name
• Date of birth
• Residential address
• Identification number (from passport, license, etc.)
• ID document image

Important Deadlines

For Existing Businesses

• Created before January 1, 2024
• Must file by January 1, 2025

For New Businesses

• Created after January 1, 2024
• Must file within 90 days of formation

For Information Changes

• 30 days to report updates
• Applies to both company and owner information

Impact on Business Owners

New Responsibilities

• Initial filing requirement
• Update monitoring
• Information verification
• Record keeping

Compliance Costs

• Time spent gathering information
• Filing preparation
• Update management
• Professional assistance if needed

Privacy and Security

How Information is Protected

• Secure federal database
• Limited access
• Strict privacy controls
• Criminal penalties for unauthorized disclosure

Who Can Access the Information

• Law enforcement agencies
• Financial institutions (with consent)
• Regulatory authorities
• National security agencies

Penalties for Non-Compliance

Civil Penalties

• Up to $500 per day of violation
• Continues until filing is complete

Criminal Penalties

• Up to $10,000 fine
• Possible imprisonment
• Criminal record implications

How to Comply with the CTA

Option 1: File Yourself

• Gather required information
• Complete FinCEN forms
• Manage updates
• Track deadlines

Option 2: Use BOISimply ($129)

• Professional guidance
• Accurate filing
• Update reminders
• Peace of mind

Next Steps for Business Owners

1. Determine if you need to file
2. Gather required information
3. Choose your filing method
4. Set up compliance systems
5. Plan for updates