The Corporate Transparency Act (the “CTA”) was passed as part of the National Defense Authorization Act, adopted by Congress January 1, 2021.[1] The CTA became effective on January 1, 2024, and will have an immense impact on corporate governance and structuring in the United States. Furthermore, it will have an acute impact on small business owners who have fewer resources to keep up with its burdensome regulatory requirements.

The CTA applies to “Reporting Companies.” A Reporting Company is “any corporation, limited liability company, or other similar entity created by filing a document with the secretary of state or similar office in any state or territory or with a federally recognized Indian Tribe, or formed under the laws of a foreign country and registered to do business in the United States.”[2] This definition is exceedingly broad and captures almost every entity used for commercial purposes in the United States. There are a number of exemptions from the definition of Reporting Companies, such as publicly held issuers, banks, accounting companies, broker-dealers, clearing agencies, and more. Few of these exemptions, if any, will apply to small business.

Without any applicable exemption, small businesses are compelled to comply with the CTA’s reporting requirements. This means that these businesses will have to report information about their Beneficial Owners (“BOs”) to the Financial Crimes Enforcement Network (“FinCEN”), a division of the Department of the Treasury. Under the CTA, a BO is a human being who owns, directly or indirectly, 25% or more of the Reporting Company, or an individual who exercises substantial control over the Reporting Company. Substantial control here means: “(1) the individual is a senior officer; (2) the individual has authority to appoint or remove certain officers or a majority of directors of the reporting company; (3) the individual is an important decision-maker; or (4) the individual has any other form of substantial control over the reporting company.”[3] Thus, even if a person owns less than 25% of a Reporting Company, they can still be a BO if they exercise sufficient control over the Reporting Company.

In order to comply with CTA requirements, Reporting Companies will have to provide the full name of the company, all trade names, current address of the principal place of business, and Tax Identification Number.[4] Each BO and Company Applicant will have to provide its full name, date of birth, current residential address, and a government issued I.D.[5] Reporting Companies, Company Applicants (those filing on behalf of a Reporting Company that was created on or after January 1, 2024, but are not a BO, such as an attorney), and BO’s may acquire a FinCEN identifier. This identifier can instead be listed on the report instead of the Company or BO’s personally identifying information.[6] Those that do not acquire a FinCEN identifier will have to report their personally identifying information to FinCEN with each report.

For Reporting Companies in existence before January 1, 2024, this information must be submitted to FinCEN by January 1, 2025.[7] For Reporting Companies created on or after January 1, 2024, this information must be submitted within 90 days of the entity’s formation.[8] Reporting Companies created on

[1] https://www.americanbar.org/groups/business_law/resources/business-law-today/2021-february/the-corporate-transparency-act/

[2] Id.

[3] FinCEN Small Business Compliance Guide, at 17, https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide_FINAL_Sept_508C.pdf.

[4] Id. at 38.

[5] Id.

[6] Id.

[7] FinCEN BOI Reporting Filing Dates, https://www.fincen.gov/sites/default/files/shared/BOI_Reporting_Filing_Dates-Published03.24.23_508C.pdf.

[8] Id.