The Corporate Transparency Act (CTA), aimed at combating illicit financial activity, went into effect on January 1, 2024. Under the act, small businesses across the United States need to file beneficial ownership information reports, also known as corporate transparency reports.
Here’s everything small business owners need to know about filing a corporate transparency report.
[Read More: What Every Small Business Needs to Know About the Corporate Transparency Act]
What to know about beneficial ownership information reporting
The CTA was developed to increase transparency in business ownership and curtail the use of anonymous shell corporations for tax fraud, money laundering, and other illegal financial activity. Under this act, all businesses that fall under the definition of a reporting company must file a beneficial ownership information report (BOIR) with the Financial Crimes Enforcement Network (FinCEN).
A reporting company is any privately held company, whether domestic or foreign, registered to conduct business in the U.S. Publicly traded companies do not fall under the CTA, as they are subject to their own reporting requirements.
A beneficial owner is any individual who owns or controls at least 25% of an organization, or directly or indirectly exercises substantial control in any of the following roles:
- They serve as a senior officer, such as a president, CEO, or general counsel.
- They have the authority to appoint or remove senior officers, board members, or other similar roles.
- They make important decisions concerning the company’s business, finances, and/or structure.
[Read More: How to Prevent Bank Fraud and Protect Your Business Account]
Reporting requirements for small businesses
Eligible small businesses will need to report the following information about their companies:
- The full legal name of