The most impactful new regulation for U.S. small businesses that took effect in 2024 is the Corporate Transparency Act (CTA), which introduces Beneficial Ownership Information (BOI) reporting requirements.
This federal law mandates that millions of small businesses report detailed information about the individuals who own or control their company to the government.
1. The Corporate Transparency Act (CTA)
The CTA was enacted to combat money laundering, terrorist financing, tax fraud, and other illicit financial activities by preventing criminals from hiding their ownership of companies through shell corporations. It does this by creating a national registry of beneficial owners.
Who Must Report? (The “Reporting Companies”)
The law applies to a vast majority of small businesses, specifically those that are corporations, limited liability companies (LLCs), or similar entities created by filing a document with a state’s secretary of state or similar office.
A company is generally considered a Reporting Company unless it qualifies for one of the 23 specific exemptions. The most relevant exemption for small businesses is the “large operating company” exemption, which applies only if the company meets all three of the following criteria:
- It has more than 20 full-time employees in the U.S.
- It has more than $5 million in gross receipts or sales as shown on its previous year’s tax return.
- It has an operating presence at a physical office in the U.S.
Because most small businesses do not meet these three conditions, they are required to report. It is estimated that up to 32 million businesses are affected.
What Must Be Reported? (Beneficial Ownership Information)
Reporting Companies must file a Beneficial Ownership Information (BOI) Report with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).
The report requires providing four pieces of personal information and an image of an identification document for every Beneficial Owner and, for new companies, every Company Applicant.
