Small Businesses Compliance With the Corporate Transparency Act
New year, new laws for small business owners. As of January 1, 2024, the Corporate Transparency Act (CTA) has come into effect, ushering in a new era of regulatory requirements for businesses across the United States. Enacted by Congress in 2021 to combat illicit activities such as money laundering and tax fraud, the CTA requires that small businesses file a report with U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). This report, known as the Beneficial Ownership Information report, is designed to provide important details identifying individuals associated with the reporting company. Millions of small businesses will be impacted by the new regulation and need to comply and register their BOI.
Who Has to File a Beneficial Ownership Report?
Small businesses falling under the category of reporting companies, including those formed under state law as corporations, limited liability companies, and limited partnerships, are required to file a Beneficial Ownership Report (BOI). The CTA defines a beneficial owner as an individual who has significant control over a reporting company, either directly or indirectly, or owns or controls a minimum of 25% of its ownership interests. Business entities not registered with the state may be exempt from this requirement. Additionally, exemptions apply to businesses with 20 or more full-time employees, over $5 million in sales, and maintain a physical presence in the United States.
Considering these criteria, an estimated 32.6 million businesses are anticipated to register a BOI this year. For businesses in existence or registered to operate before January 1, 2024, the deadline for filing the first BOI report is January 1, 2025. However, businesses created or registered in 2024 have a 90-day window to submit their BOI report.
How To Register With FinCEN
Business owners looking to register their businesses can do so electronically through the U.S. Treasury’s FinCEN website. There are no fees associated with filing the required report. During the registration process, business owners will need to provide ownership information, including the owner’s full legal name, tax identification numbers, copies of driver’s licenses or passports.
To navigate compliance with the new rules and registration process, business owners may want to consult with their attorney or accountant. These professionals can offer valuable guidance to ensure compliance with the Corporate Transparency Act.
Buying a Business in 2024 and CTA Compliance
For prospective business buyers in 2024, the complexities of the CTA add another layer to the already multifaceted process of buying a business. Beyond the due diligence and negotiations, compliance with the CTA, including filing a BOI for the newly acquired business, becomes a crucial aspect to manage.
To help navigate the process of buying a business, consider assembling a team of experienced advisors to guide you through each step. Engaging a buy-side business broker, acting as an intermediary, can help you understand the nuances of compliance and facilitate a smooth transition. Visit the BizBuySell Broker Directory to find a seasoned broker who can guide you through the process and help to ensure your new business is on the path to success.