Small Business Guide for the Corporate Transparency Act (CTA)

On January 1, 2024, a significant change in federal law impacting over 32 million entities, predominantly small businesses, came into effect. This CTA guide offers a step-by-step approach to help small business owners navigate these new requirements.

The Corporate Transparency Act (CTA) mandates that these businesses file a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN). Non-compliance can lead to substantial penalties, including a civil fine of $590 per day and criminal charges resulting in fines up to $10,000 and two years in prison.

Likewise, disclosing BOI without authorization has a $500 per day penalty, and up to a maximum of $250,000, and up to five years’ imprisonment.

Exemptions:

To begin with, the mandate exempts sole proprietorships and general partnerships (in most states) because their formation does not require registration with a state office. Moreover, there are exemptions for 23 specific types of entities.

These exemptions largely cover organizations that already comply with stringent federal reporting standards, including public corporations, banking and financial institutions, securities brokers and dealers, insurance entities, registered investment firms and advisors, along with pooled investment vehicles, among others.

“Large operating companies” are also exempt from this requirement. Such companies are characterized by employing more than 20 full-time workers, having a physical office in the U.S., and having filed federal income tax or information returns in the prior year that report over $5 million in gross sales or receipts originating from the United States.

Step-by-Step CTA Compliance Checklist:

Step 1: Identify if Your Business Needs to File a BOI Report:

  • Understand your business structure (LLC, corporation, partnership, etc.).
  • LLCs and corporations generally need to file, unless exempt.
  • For other structures, review the definition of a “reporting company” and seek legal advice if necessary.

 

Step 2: Check for Exemptions:

  • See if your business qualifies as a “large operating company” or an “inactive entity.”
  • Review other possible exemptions.
  • Consult with a legal advisor for clarification.

 

Step 3: Prepare to File the BOI Report:

  • Identify your beneficial owners (individuals with substantial control or owning at least 25% of the company).
  • Notify beneficial owners about the CTA requirements.
  • Collect necessary information from beneficial owners or advise them to apply for a FinCEN Identifier.
  • Keep all company information ready and updated.
  • Company Applicants

 

Step 4: Implement a Data Management System:

  • Ensure the information is current for the initial report and subsequent updates.
  • Consider investing in an entity management system like our BOI Manager to keep all your data in one place and avoid doing it all over again in the future.
  • Securely store personal information.

 

Step 5: Plan Your Filing Strategy:

  • Decide on the timing of your initial BOI report filing, keeping in mind the deadlines.
  • Choose between filing the report yourself or using a third-party service.

 

Step 6: Repeat for Each Business You Own:

  • Ensure compliance for all businesses under your ownership.

Next Steps for Your Business:

  • Reevaluate the necessity of all your business entities.
  • Consider updating your governance documents to reflect the CTA requirements.


The Corporate Transparency Act introduces critical changes for small businesses in the U.S. By following this step-by-step guide, business owners can ensure compliance, thereby avoiding hefty penalties. It’s crucial to start the process now, seek necessary legal advice, and stay ahead of any updates or changes in the legislation.

Reporting Deadlines:

1. Initial Beneficial Ownership Report:
Existing Entities: Corporations, limited liability companies (LLCs), and other similar entities created or registered before January 1, 2024, must file their initial beneficial ownership information report by January 1, 2025.

New Entities: Entities created or registered on or after January 1, 2024, must file their initial report within 30 days of their formation or registration.

2. Updates to Beneficial Ownership Information:
Within 30 Days: Any changes to the beneficial ownership information, such as changes in ownership, control, or contact information, must be reported to the Financial Crimes Enforcement Network (FinCEN) within 30 days of the change.

3. Correction of Inaccurate Information:
Within 30 Days: If an entity discovers that information previously reported was inaccurate, they must file a corrected report within 30 days of becoming aware of the inaccuracy.
Remember, preparing early and staying informed are key to smoothly navigating these new federal requirements. Consider filing with Platinum Filings’ CTA Platform where you can rest assured that your entity is compliant as your business grows and you need to include new owners or investors, we make sure your information stays in the same place and make it easier to file again.

Still have questions?

Contact us for further assistance.