The U.S. Chamber of Commerce recently released an article explaining the Corporate Transparency Act (CTA) to businesses as the Jan. 1 deadline for filing a corporate transparency report with beneficial ownership information (BOI) looms. 

“Those who fail to file by this deadline — or fail to update this information if needed — could face up to two years imprisonment and fines up to $10,000, in addition to civil penalties of up to $591 per day,” the Chamber article says. 

There have been multiple attempts to stall the CTA by different groups since it was enacted in 2021. 

In March, the Alabama U.S. District Court ruled that the CTA is unconstitutional. The decision protects members of the National Small Business Association (NSBA) who brought the suit. However, 32 million other small businesses in the nation are still required to meet the filing requirements. 

Hundreds of small businesses, including the Society of Collision Repair Specialists (SCRS), National Small Business Association, and S Corporation Association, asked for the passage of different bills, such as S3625 and its companion HR5119, that would have stalled legislation; however, none of the bills have made it through Congress. 

One letter sent to Congress in March says the CTA specifically burdens the smallest of businesses with reporting requirements by applying only to entities with 20 or fewer employees, or less than $5 million in revenue. 

“The very companies least equipped to shoulder the regulatory burden imposed by the CTA,” the letter says. 

The Chamber of Commerce story says individuals are considered beneficial owners of a company under the act if they directly or indirectly have a significant ownership stake, including having a major influence on the reporting company’s decision or operations, own at least 25% of the company’s shares, or have a similar level of control over the company’s equity. 

All reporting companies must provide their legal name, trademarks, and current U.S. address of the main business or U.S. operational location. A taxpayer identification number will be needed and the jurisdiction where they were formed or registered. 

Businesses registered or established after Jan. 1, 2024 are required to provide information regarding the business, its beneficial owners, and its company applicants. This includes owners’ and applicants’ names, addresses, birthdays and identification numbers such as license or passport number and jurisdiction of the documents. 

Businesses registered or established prior to Jan. 1, 2024 do not have to submit information regarding company applicants and must only submit information on the business and beneficial owners, the article says. 

If a business owner changes their address, legally changes their name due to marriage or divorce, or obtains a new driver’s license, it may necessitate an update to the company’s BOI report, the article says. Operational changes or a new delegation of authority could also qualify. 

It says the deadline for updating reports because of changes could be as short as 30 days. 

Many financial institutions require businesses to submit beneficial ownership information, the article says. However, this does not fulfill a small business’s federal requirements.

Businesses established on or after Jan. 1, 2025 will have 30 days from notification or public announcement of their formation to submit their first report to the Financial Crimes Enforcement Network (FinCEN). 

Roger Harris, president of Padgett Business Services, advises in the article that businesses seek the assistance of an attorney or accountant when filing initial or updated reports. 

“There are some issues in the law that could require an interpretation of certain facts to determine who is a beneficial owner that must be included in the filings,” Harris said in the article. “If you find yourself in this situation, … consult with an attorney to help you decide how your set of facts fits within this law.”

Businesses with simpler filings should seek out an accountant or tax preparer but he warns not all tax professionals will be offering services.

“Some in the accounting and tax profession are not going to offer this service to their clients because the errors and omission policies these firms have will not cover these services,” Harris explained. “We are already seeing companies pop up that claim to be specialists in this area. If a business wants to go in this direction, they should make sure they choose a legitimate firm with the proper expertise and reasonable fees that will stand behind their work.”

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