Corporate Transparency Act: It's OK to Ask for Help

A federal district court in Texas suspended the enforcement of the Corporate Transparency Act (CTA) and its beneficial ownership information (BOI) reporting requirements on Dec. 3, 2024. However, the federal government appealed this ruling.

In case the requirements are reinstated, businesses may consider preparing their ownership information even though they are not currently required to file BOI reports. The outcomes of this ruling affect most businesses in the U.S., so it’s crucial to stay informed of any changes.

More than 32 million businesses in the United States are small—playing an important role in our economy by creating nearly 65% of net new job creation over the past 20 years and making up almost 99% of all businesses in the country. Yet, starting a small business, running it, and staying compliant with ever-changing laws and regulations is challenging.

What is the Corporate Transparency Act?

One of those laws that small businesses must pay close attention to is the Corporate Transparency Act (CTA), designed to curb financial crimes and fraud. Companies are asked to submit a Beneficial Ownership Information Report (BOIR) to the Financial Crimes Enforcement Network (FinCEN), disclosing the identities of the people who own or control the business to make it more difficult for individuals to use corporate entities for illicit purposes.

Tips for filing your BOIR

To help encourage small businesses to start the BOIR filing process, here are some tips. First, determine if your business qualifies as a reporting company under the CTA. Typically, this includes corporations, limited liability companies (LLCs), and similar entities established through filings with state or Tribal authorities. Once you have confirmed your obligation to file, provide detailed information about your beneficial owners, the individuals who have significant control over the company or own 25% or more of its interests. 

For many small business owners—many of whom have other jobs in addition to running their own business, seeking guidance from third-party companies specializing in regulatory compliance can be highly beneficial. LegalZoom’s research has found that most business owners actually prefer hands-on guidance to ensure they submit the most accurate reports to avoid non-compliance. Additionally, specialists offer invaluable guidance to ensure all required information is submitted on time, thereby minimizing the risk of errors or potential penalties. 

Frequently asked questions about the Corporate Transparency Act

What is the purpose of the Corporate Transparency Act?

The Corporate Transparency Act is a new U.S. law intended to help identify and prevent money laundering and other illicit activities within the country by enforcing transparency standards for U.S. businesses.

Who is considered a beneficial owner?

A beneficial owner is anyone who has significant control over a reporting company or who owns at least one-quarter of the company's ownership interests.

How often do you need to update beneficial ownership information?

Reporting companies need to update their beneficial ownership information within 30 days of certain changes, such as any change in the company's ownership.