The Corporate Transparency Act (CTA) Beneficial Ownership Information Reporting–implemented by FinCEN in January 2024–requires many businesses to report detailed ownership information to the government. 

While this regulation went into effect on January 1, 2024, there was discussion in March regarding the constitutionality of this act--as well as consideration for a formal delay in order to provide additional time for small businesses to learn about and better understand the requirements. 

Now, months later, no formal delay has been issued–or an update in the legal discourse–so we are here to remind you of your small business clients’ responsibilities ahead of the January 1, 2025 deadline.

At this stage, attorneys are recommending that reporting companies that qualify move forward with the reporting. If complicated questions come up with your clients, we recommend reaching out to your attorney for further information and guidance.

Summary: Beneficial Ownership Information (BOI) Reporting

Companies must report information about "beneficial owners" - individuals with significant control or owning at least 25% of the company.

• • For companies formed after January 1, 2024, information about the company applicant and the filing director is also needed.

Reporting Companies are required to report:

• • The legal name of the company and any trade name (DBA) used by the company
  • The company's street address
  • Tax Identification (EIN, SSN, TIN)

Beneficial Owners of Reporting Companies must report:

• • Full name
  • Date of birth
  • Residential Address
  • Government ID number (passport or driver's license)
  • Scanned government ID

Who Needs to Report Beneficial Ownership Information?

Most U.S. and non-U.S. businesses formed by filing with a secretary of state or registered to do business in the U.S. are required to report, unless exempt.

See the table below for detailed exemptions–followed by a list of key exemptions to keep an eye on. 

Key Exemptions to Consider

1. Your own firm

As a reminder, if your firm is registered with the Public Company Oversight Board under the Sarbanes-Oxley Act, your firm is exempt. If it is not registered with PCOAB, you must file BOI.

2. Larger operating companies are exempt from BOI reporting

The following is likely a rare scenario: but if you still service clients that started as a small business– that has since scaled significantly–they might be exempt from filing, if:

• The business has more than 20 full-time employees
• The business has a physical presence for operations in the United States
• The business has reported more than $5,00,000 in revenue in the last year 

However, If the business drops below 20 employees, the business owner is required to file.

3. Subsidiaries of Exempt Entities

If a client is a subsidiary of a larger entity whose ownership interests are controlled by a larger company or wholly owned, directly or indirectly, they might be exempt.

4. Tax-exempt entities

Include:

• 501(c) nonprofit organizations
• 527(e)(1) political organizations
• Charitable trusts described in IRC4947(A)(1) or (2)

5. Other Common Exemptions:

Include:

• Banks
• Credit Unions
• Registered Broker/Dealers
• Investment Companies
• Insurance Companies

6. Companies that formally dissolved their entity with the Secretary of State before January 1, 2024

Clients with companies that ceased to exist as a legal entity before the the BOI reporting requirements became effective January 1, 2024 were never subject to BOI reporting requirements–unless the client has a secondary business that is still an active entity.

Filing Deadlines

Reports are submitted electronically through FinCEN’S BOI e-filing system. 

How to Help Your Small Business Clients Comply 

1. Direct clients to FinCEN's website to see if they need to report BOI.

2. If required, help them to identify beneficial owners and those with substantial control.

• For details beyond basic information, direct them to an Employment Attorney like Nick Lipresti of Lipresti Law.
  • If your clients are looking for a trusted attorney, we can help. Our Connected Payroll network puts small business owners in touch with reputable experts right in their neighborhood.
• Consider advising them to create a procedure for ongoing monitoring of ownership information, and what to do if a beneficial owner leaves their company.

3. As a trusted ally for your small business clients, you must also remind them the consequences of noncompliance.

• Failure to comply can result in civil penalties of $500 per day, or even criminal penalties of up to $10,000 and imprisonment.

Learn More

FinCEN's website offers small business resources like videos, brochures, and FAQs to help your small business clients understand BOI reporting. Visit their website for more information.