Corporate Transparency Act Checklist for Small Businesses

On January 1, 2024, a new congressional law called the Corporate Transparency Act (CTA) went into effect. This law implements new reporting requirements that will apply to millions of small businesses nationwide. Small business owners should be aware of this new law and how it applies to them. The experienced Arizona business lawyers at Harrison Law, PLLC, help clients with various legal business matters, including compliance with federal regulations. If you have questions about how the Corporate Transparency Act affects your small business, consider calling (480) 320-2310 and scheduling a consultation with our dedicated attorneys today.

What Is the Corporate Transparency Act?

Under the Corporate Transparency Act, previously unregulated companies will be required to report information regarding “beneficial owners” of the company to the federal government. Beneficial owners are defined as anyone who owns at least 25% of the company, or anyone who has significant control within the company. Information on these beneficial owners must be reported to the United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) through the Beneficial Ownership Information (BOI) form. Business owners who fail to comply with these new regulations may face fines of up to $10,000 and up to two years in prison.

The CTA is intended to close a corporate regulations loophole that allows criminals to use shell companies to hide their identities. However, this law will affect virtually all small businesses in the United States, not just those owned by criminals. Independent contractors, family offices, and limited liability companies (LLCs) are all required to file reports under the CTA unless they do not meet the definition of a reporting company or are exempt.

How Does the Federal Government Define “Substantial Control”?

According to the Federal Crimes Enforcement Network (FinCEN), an individual can have substantial control over a company in one of the four following ways:

  • Having a senior office position, such as president, CEO, CFO, COO, general counsel, or other high-ranking position
  • Having the authority to hire or terminate certain senior officials or a majority of directors
  • Being an “important decision-maker” with the authority to make decisions regarding the company’s finances, business operations, or structure
  • Having any other type of significant control over the company