The Corporate Transparency Act: What Small Business Owners Need to Know
As of January 1, 2024, a major change in federal compliance requirements has taken effect for small businesses across the United States. The Corporate Transparency Act (CTA) now requires certain businesses to report information about their ownership to the federal government. At Jimenez-Diaz Law, we believe in helping clients stay ahead of regulatory changes, and understanding this law is critical for business owners looking to stay compliant and avoid penalties.
What Is the Corporate Transparency Act?
The Corporate Transparency Act is a federal law passed in 2021 that officially took effect on January 1, 2024. It requires many corporations, LLCs, and other entities to disclose information about their beneficial owners—those who either control or own at least 25% of the company.
These reports must be submitted to the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Department of the Treasury. The goal is to prevent financial crimes such as money laundering and the use of anonymous shell companies.
Why This Matters — Even If You Own a Small Business
Many small business owners may think this law doesn’t apply to them. But the CTA was intentionally designed to cover smaller, privately held companies that have traditionally not been subject to such reporting requirements.
If your business is a corporation, LLC, or similar entity formed by filing with a Secretary of State, and you don’t meet specific exemption criteria (such as having 20+ full-time employees and over $5 million in annual revenue), you are likely required to comply.
Failing to report could result in significant penalties, including daily fines and even criminal liability.
What Needs to Be Reported?
Companies subject to the CTA must file a Beneficial Ownership Information (BOI) Report with FinCEN, which includes:
• Full legal name of each beneficial owner
• Date of birth
• Residential address
• A unique ID number from an approved document (driver’s license or passport)
• An image of the identification document
Additionally, companies must report their own information, including legal name, trade names, EIN (tax ID number), and jurisdiction of formation.
Who Is Exempt?
The CTA outlines 23 categories of exempt entities, including:
• Large operating companies (20+ full-time U.S. employees, $5M+ in annual U.S. revenue, physical U.S. office)
• Inactive entities that haven’t conducted business or had ownership changes since before 2020
• Certain regulated entities like banks, credit unions, and registered investment companies
Most small, family-owned, or single-member LLCs will not qualify for exemption and must file.
What Are the Deadlines?
The CTA provides specific filing timelines:
• Companies formed before January 1, 2024 must file their initial report by January 1, 2025
• Companies formed between January 1, 2024 and January 1, 2025 have 90 days from the date of formation
• Companies formed on or after January 1, 2025 will have 30 days to file
Any changes to beneficial ownership or the reported information must be updated within 30 days.
What Are the Penalties for Not Complying?
The consequences for failing to comply are serious:
• Civil penalties of up to $500 per day for each day of noncompliance
• Criminal penalties including fines up to $10,000 and up to two years in prison
This is why it’s critical to determine your obligations and act quickly.
How Jimenez-Diaz Law Can Help
We understand that small business owners already have a lot on their plates. At Jimenez-Diaz Law, we guide our clients through every step of the compliance process, including:
• Determining if your business is subject to the CTA
• Preparing and filing your Beneficial Ownership Report with FinCEN
• Advising on how to update your report if your ownership changes
• Helping you structure your business with full legal compliance in mind
Schedule a consultation today to ensure your business meets federal requirements—and avoid unnecessary fines or legal risk.
This post is for general informational purposes only and does not constitute legal advice. For legal guidance tailored to your business, please contact Jimenez-Diaz Law directly.
Sources:
• U.S. Chamber of Commerce: Corporate Transparency Act Overview
• FinCEN: Beneficial Ownership Reporting
• Wolters Kluwer: CTA Compliance Checklist