Small Businesses Subject to New Federal Disclosure Rule

A new and little-publicized federal rule requires certain small and private companies to file ownership information or face potential penalties.

The Corporate Transparency Act (CTA), which went into effect on January 1, 2024, aims to combat illicit financial activity, including tax fraud and money laundering.

Under the new legislation, businesses that meet certain criteria must submit a Beneficial Ownership Information (BOI) Report to the U.S. Department of Treasury Financial Crimes Enforcement Network (FinCEN), providing details identifying individuals who are associated with the reporting company.

Covered Companies

Companies covered by the rule include corporations, limited liability companies and other legal entities created by filing with one of the 50 U.S. states or a tribal government. Certain foreign companies that are registered to do business in the U.S. also will be required to file.

The CTA exempts from the reporting requirements 23 types of entities, including large companies that operate in the United States, employ more than 20 full-time employees and generate more than $5 million in revenue.

For a full list of exemptions, see FinCEN’s “Small Entity Compliance Guide.”

Deadlines

Companies that existed prior to January 1, 2024 have until January 1, 2025 to file beneficial ownership information with the FinCen.

Companies registered or created on or after January 1, 2024, however, must report beneficial ownership information within 90 calendar days after receiving actual or public notice that its creation or registration is effective. Specifically, this 90-calendar day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.

A company created or registered on or after January 1, 2025 must file its report within 30 calendar days after receiving actual or public notice that its creation or registration is effective.

Filing Information

There is no cost to file a Beneficial Ownership Information (BOI) Report.

Beneficial ownership information is not an annual reporting requirement, and needs to be submitted only once, unless the filer needs to update or correct information.

Generally, reporting companies must provide four pieces of information about each beneficial owner:

• name;

• date of birth;

• address; and

• the identifying number and issuer from either a non-expired U.S. driver license, a non-expired U.S. passport, or a non-expired identification document issued by a state (including a U.S. territory or possession), local government, or Indian tribe. If none of those documents exist, a non-expired foreign passport can be used. An image of the document also must be submitted.

The company also must submit certain information about itself, such as its name(s) and address. In addition, reporting companies created on or after January 1, 2024, are required to submit information about the individuals who formed the company (“company applicants”).

Guides, Resources

For more information, see FinCEN’s “Small Entity Compliance Guide.”

Filers can view informational videos and webinars, find answers to frequently asked questions, connect to the contact center, and learn more about how to report at www.fincen.gov/boi.