This blog post does not constitute legal advice. To understand how the recent legislation impacts your small business, it is advisable to seek guidance from a legal professional. The information provided here is general and may not be applicable to your specific circumstances.
A relatively unnoticed yet already active law is the Corporate Transparency Act (CTA), which applies to small businesses, particularly those structured as Limited Liability Companies (LLCs) or other entities.
Enacted in 2021, the CTA was designed by Congress to address issues such as money laundering and terrorist financing. Due to the lack of requirements in many states for business owners to disclose their personal information, the government faced challenges in accessing this crucial data. With the CTA now in effect as of January 1st of this year, small business owners operating through entities are obligated to report three pieces of Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury.
Reporting Company Information
The initial category of Beneficial Ownership Information (BOI) is the reporting company information. A “reporting company” encompasses any business, whether domestic or foreign, established by filing documentation with the secretary of state (or an equivalent State office) or an Indian tribe. Such reporting companies are required to disclose the following details to FinCEN:
- The reporting company’s name, along with any trade names or Doing Business As (DBA) names, if applicable.
- The physical address of the business.
- The jurisdiction under which the company is formed.
- A “unique business number,” which can include the company’s Employer Identification Number (EIN) from the IRS.
If you operate a business through an LLC (or another entity), it is highly probable that your entity falls under the category of a “reporting company,” unless specific exemptions for reporting companies apply.