Far-Reaching Corporate Transparency Act Requires Start-Up and Small Businesses To Disclose Their Beneficial Owners In 2024 And Beyond

By Romin P. Thomson, Esq. and Liudmyla A. Balke, Esq.

A new disclosure requirement that will impact countless small businesses went into effect in the United States on January 1, 2024. The Corporate Transparency Act (“CTA”) was enacted to combat money laundering, tax fraud, and other illicit activities. The CTA requires many businesses operating in the United States to identify and report their “beneficial owners” to the Financial Crimes Enforcement Network (“FinCEN”) using the portal located at www.boiefiling.fincen.gov.

“Beneficial owners” are individuals who control at least 25% of an entity’s ownership interests or otherwise exercise substantial control over the entity.

Entities in existence prior to 2024 will have until December 31, 2024, to report their beneficial owners. Entities formed in 2024 will have ninety (90) days to report and those formed thereafter are expected to have thirty (30) days to report (from the date of formation). These newer entities require a separate disclosure of the identity of the “applicant” who filed the report on behalf of the entity.

The required disclosure includes the names, dates of birth, and addresses of beneficial owners and applicants. Copies of government-issued I.D.s must also be uploaded into the portal. All information must be kept current and updated.

Reporting companies include almost all small businesses operating in the United States, though there are significant exemptions. For example, entities that have more than 20 full-time employees, more than $5 million in gross receipts, and physical offices in the United States are exempt.

Importantly, the reported information is not intended to be public information. FinCEN is required to maintain a secure and confidential database of beneficial ownership information that will not be publicly accessible.

Responsibility for compliance rests with the reporting entities and their respective beneficial owners. The penalties for non-compliance are significant and include civil and criminal penalties. 

The foregoing is a summary only. Detailed information regarding CTA, including FAQ’s, can be found at here and here. 

Sweeney Mason LLP is here to help and can assist with the compliance process and answer any questions you may have with respect to the CTA.

For more information about any of these corporate legal updates, please contact our corporate team at 408-356-3000 or via email: Romin Thomson at rthomson@smllp.com or Liudmyla Balke at mbalke@smllp.com.