Understanding the Corporate Transparency Act

Key Deadlines and Critical Information Every Small Business Owner Needs to Know 

In today's business environment, transparency and accountability are not just ideals—they are legal requirements. The Corporate Transparency Act (CTA), enacted as part of the National Defense Authorization Act for Fiscal Year 2021, represents a significant shift in how businesses in the United States must operate. Effective January 1, 2024, the CTA requires certain companies to disclose key information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). This is done by filing a Beneficial Owner Information Report, in short BOIR. 

Who Needs to Report and What Information is Required?

The CTA applies primarily to smaller businesses, particularly those structured as limited liability companies (LLCs), corporations, and other entities that might be used to conceal ownership or control. If your business falls into this category, you’ll need to gather and report specific information about your company’s beneficial owners—those who own or control 25% or more of your business or who have substantial control over it.

For example, if you’re the sole owner of a small LLC, you would need to report your full legal name, your date of birth, the address of your primary residence or business, and the unique identifying number from your passport or driver’s license. If your business has multiple owners, each person who meets the ownership or control criteria will need to provide the same details.

Key Deadlines

The CTA took effect on January 1, 2024, and with it comes a series of deadlines that business owners need to be aware of:

• Existing Entities: If your business was formed before January 1, 2024, you must file the required beneficial ownership information with FinCEN by January 1, 2025 With just four months remaining, this deadline is rapidly approaching. 
• New Entities: If your business is formed on or after January 1, 2024, you must submit your beneficial ownership information to FinCEN within 90 days of your company’s formation. This is a critical step to ensure your business is compliant from the outset.
• Changes in Ownership or Control: Any changes in beneficial ownership must be reported within 30 days of the change. This means that if a new owner joins your business, or if an existing owner’s percentage of ownership or control changes, you’ll need to update your FinCEN filings promptly.

Why is This Important?

The CTA’s requirements are a significant change for many businesses, particularly those that have never had to disclose ownership information to the government before. The information you provide will be used by law enforcement agencies and financial institutions to prevent and detect financial crimes. While this data is not publicly available, failing to comply with the CTA could result in substantial fines or even criminal penalties.

Legal Challenges to the Corporate Transparency Act: National Small Business United v. Yellen

In the case National Small Business United, d/b/a the National Small Business Association, et al. v. Yellen, et al., a coalition of small business groups challenged the Corporate Transparency Act, arguing that it infringes on privacy rights and imposes an undue burden on small businesses.

In March 2024, a federal court made a significant ruling, declaring that the CTA is unconstitutional because it goes beyond what Congress is allowed to do under the Constitution. As a result, the court decided that the government cannot enforce the CTA against the specific people and groups involved in the lawsuit, including the National Small Business Association and its members.

But here’s the key point: this ruling only applies to those specific plaintiffs. For everyone else, the CTA is still in effect, and businesses must continue to follow its rules. So, unless you’re part of that specific group, you still need to meet the CTA’s deadlines and provide the required information. 

How to Comply with the CTA

Navigating the Corporate Transparency Act’s requirements might seem overwhelming, but there are resources available to help. The FinCEN website provides detailed guidance and a comprehensive Q&A section that answers many common questions about the CTA.

To further assist you, our firm offers a free DIY guide that walks you through the process of submitting your Beneficial Ownership Information Report (BOIR) to FinCEN, step-by-step. To get your copy of our DIY guide, simply email us at contact@dolevlaw.comtoday. 

Conclusion

The Corporate Transparency Act is more than just another regulation—it’s a fundamental change in how businesses must operate. By understanding what’s required and taking steps to comply, you can avoid penalties and focus on what you do best: running your business.

If you’re unsure about how the CTA affects your business, or if you need help with the reporting process, don’t hesitate to reach out. Our firm is here to provide the guidance you need, whether that’s through our detailed DIY guide or personalized legal advice.

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Disclaimer

The information provided in this blog is for general informational purposes only and does not constitute legal advice. Employment laws vary by jurisdiction, and the specific circumstances of your business may require tailored legal guidance. Readers should consult with legal counsel before taking any action based on the content of this blog. Dolev Law, LLC is not responsible for any actions taken or not taken based on this blog's information. Reading this blog does not create an attorney-client relationship.