The CTA and Why It’s Important to Every Small Business Owner

Q: Is it true that I could be fined under the regulations established by the Corporate Transparency Act (CTA) if I don’t report my newly formed landscaping business established in January 2024? A: You must report your company’s information to the U.S. Department of Treasury Financial Crimes Enforcement Network (FinCEN) within 90 days or face risk. New companies formed after January 1, 2024, must file initial reports 90 days after creation, while existing ones formed before that date must file by January 1, 2025.

What is the Corporate Transparency Act (CTA)?

Effective January 2024, the CTA Act mandates that small businesses with fewer than 20 employees report ownership information to the U.S. Department of Treasury under a Beneficial Ownership Information (BOI) Report. The legislation, introduced in 2021, aims to combat illicit activities such as tax fraud, money laundering, and terrorism financing. Non-compliance may result in fines of up to $500 daily or criminal penalties. The CTA seeks to enhance transparency by capturing detailed ownership information for specific U.S. businesses operating in or accessing the country’s market.

Who is considered a beneficial owner of a company?

Per the CTA, a beneficial owner has a substantial ownership stake in a company, exercising significant influence over decisions or operations. An ownership stake includes owning at least 25% of the company’s shares or having comparable control over its equity.

What information must you report about a company’s beneficial owners?

Reporting companies established after January 1, 2024, must provide information about the business, its beneficial owners, and company applicants, including names, addresses, birthdays, identification numbers, and document jurisdiction. Companies established before this date can omit information about company applicants. All reporting companies must furnish their legal name, trademarks, current U.S. address, taxpayer identification number, and formation or registration jurisdiction. 

While there’s no annual reporting requirement, updates are mandatory for changes within the business, such as address or name changes for beneficial owners, new driver’s licenses, or operational shifts. Even alterations in operational duties that confer substantial control may trigger updates, emphasizing the ongoing nature of compliance beyond the initial filing period.

Where can business owners get help with their beneficial ownership information reports?

While companies may file their own BOI reports, many express reservations. While the forms are simple, small business owners juggling various responsibilities may risk overlooking or delaying the filing deadlines. Because there could be potential legal ambiguities in determining beneficial ownership, you should seek guidance from a knowledgeable advisor, such as an attorney or accountant, to ensure timely and accurate completion of initial and updated reports according to FinCEN’s standards. 

Accountants or tax preparers could manage straightforward cases. Still, not all professionals in these fields may offer BOI services due to insurance limitations. Be cautious when selecting firms claiming expertise in this area, emphasizing the importance of legitimacy, expertise, and reasonable fees.