Only 30% of Small Businesses Have Filed Required Ownership Reports as the January 1 Deadline Approaches
As 2024 draws to a close, a deadline looms for millions of small business owners across the United States. At the start of the year, the Corporate Transparency Act (CTA) went into effect, an effort by Congress to combat money laundering and tax fraud. As a result, most small businesses are now required to file a report with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). This report, the Beneficial Ownership Information report, provides identifying information for the reporting company to FinCEN. Recent data shows that only 30% of affected businesses have completed this mandatory filing, leaving millions of small businesses at risk of non-compliance as the January 1, 2025 deadline approaches.
What Business Owners Need to Know
The scope of the Corporate Transparency Act is broad and impacts most small businesses in the United States. Understanding whether your business needs to comply is important for maintaining legal compliance and avoiding potential penalties.
Recent Developments for the Corporate Transparency Act
While the January 1, 2025 deadline remains in place, there have been some recent developments in CTA implementation:
- As of December 1, 2023, only about 9.5 million businesses have filed their BOI reports - approximately 30% of the estimated 32.6 million businesses required to file. FinCEN is currently receiving about 1 million new reports per week.
- A federal court in Texas has temporarily halted enforcement of the BOI reporting rules, though businesses should continue preparing for compliance as the deadline remains unchanged.
Penalties for Non-Compliance
There are penalties and consequences for non-compliance:
- Civil penalties of up to $591 per day for continuing violations
- Criminal penalties of up to $10,000
- Potential imprisonment of up to two years
While there are non-compliance consequences, FinCEN understands this is a new requirement and provides a 90-day grace period to correct mistakes or omissions without penalty.
Who Needs to File a Beneficial Ownership Information Report?
The BOI filing requirement applies to most corporations, LLCs, and limited partnerships. Any business entity that is created by filing documents with a secretary of state or similar office is generally required to file. This includes:
- Domestic corporations
- Limited Liability Companies (LLCs)
- Limited Partnerships (LPs)
- Limited Liability Partnerships (LLPs)
- Business trusts
- Most other entities formed through state filings
Exemption Criteria
Your small business may be exempt if it meets all of the following criteria:
- 20 or more full-time employees
- Over $5 million in annual sales from U.S. operations
- Physical presence in the United States
Unless your business meets all of these exemption criteria, you must file a Beneficial Ownership Information report.
Impact on Business Sales and Acquisitions
For business owners planning to sell their business or for buyers looking to buy a business, CTA compliance has become an important consideration in the transaction process. Understanding these requirements is essential for both parties to ensure a smooth transition and maintain compliance.
For Current Business Owners Planning to Sell:
- Compliance as a Selling Point: Demonstrating CTA compliance can enhance your business's appeal to potential buyers and streamline the sale process
- Documentation Requirements: Maintain clear records of your BOI filing and any updates to ownership information
- Disclosure Obligations: Be prepared to share BOI filing information during the due diligence process
- Working with Brokers: Your business broker can help ensure CTA compliance is properly addressed in the sales process and documentation
For Prospective Business Buyers:
- Due Diligence: Request and review the current owner's BOI filing status as part of your due diligence process
- Post-Acquisition Requirements: If you acquire a business in 2024, you must file a new BOI report within 90 days of the acquisition date
- Ownership Structure Planning: Consider how your intended ownership structure will affect BOI reporting requirements
- Professional Guidance: Work with a business broker who understands CTA requirements and can guide you through both the acquisition and compliance process
How to File a Beneficial Ownership Report Before the Deadline
Filing a BOI is free and must be completed electronically through FinCEN's BOI E-Filing System on their website.
A "beneficial owner" is defined as someone who either:
- Owns at least 25% of the company's ownership interests, or
- Has "substantial control" of the entity
To complete your filing, you'll need to gather:
Required Information:
- Company Information:
- Legal business name
- Any trade names or DBAs
- Current business address
- State of formation
- Formation date
- Beneficial Owner Information:
- Full legal name
- Date of birth
- Current residential address
- Tax identification numbers
- Copies of identification documents (driver's license or passport)
Next Steps and Professional Support
With the deadline approaching, now is the time to file the Beneficial Ownership Report:
- Consult with your attorney or accountant to confirm your filing obligations and ensure accurate reporting
- Begin gathering all required documentation to avoid last-minute complications
- File before the January 1 deadline to ensure compliance and avoid potential processing delays
- If buying or selling a business, engage a qualified business broker who understands CTA requirements
Don't wait until the last minute – ensure your business starts 2025 in full compliance with the Corporate Transparency Act. Contact a qualified business broker today to help navigate both your transaction and CTA compliance requirements. Visit BizBuySell’s Broker Directory to find a business broker to help with your business transaction.
Important Note: While enforcement is currently paused due to court action, the filing deadline remains in effect. Business owners should proceed with gathering necessary documentation and preparing their filings to ensure compliance by the deadline.