regulations small

The Corporate Transparency Act, which went into effect Jan. 1, will affect millions of small businesses across the country. Notably, it requires businesses that meet certain criteria to submit a Beneficial Ownership Information Report to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).

The Corporate Transparency Act is intended to combat illicit activity such as tax fraud, money laundering and financing for terrorism. To do that, it captures information about beneficial owners with specific U.S. businesses operating in or accessing the country’s market. Beneficial owners are people who, directly or indirectly, have a significant ownership stake in a company. They must own at least 25% of a company’s shares or exert a comparable level of control over the company’s equity.

Businesses created before Jan. 1, 2024, must file by Jan. 1, 2025. Businesses created after Jan. 1, 2024, must file within 90 calendar days of receiving notice of their creation or registration.

Who Needs to File?

The flowchart below appears in section C.1 of FinCEN’s Beneficial Ownership Information FAQ document. 

Who must file

Who’s Exempt?

According to FinCEN’s Beneficial Ownership Information FAQ, 23 types of entities are exempt from beneficial ownership information reporting requirements. These include publicly traded companies meeting specified requirements, many nonprofits and certain large operating companies.

The table below, which appears in the FinCEN’s FAQ, summarizes the 23 exemptions:

Exempt entities

Has the Corporate Transparency Act Been Challenged?

In a word, yes.

On March 1, a U.S. district court in Alabama deemed the law unconstitutional because it exceeds Congress’ authority. The U.S. government has appealed that decision to the U.S. Court of Appeals for the 11th Circuit. Though the law remains in effect for most businesses, its future is uncertain.

To learn more about the federal district court’s decision and what might come next, read a March 28 Perkins Coie blog post here

Where Can I Learn More?

  • Visit the Financial Crimes Enforcement Network, which collects beneficial ownership information here.
  • Learn more about reporting deadlines here
  • Subscribe here to receive FinCEN updates.
  • Fead the FinCEN’s FAQ page here
  • Visit the U.S. Chamber of Commerce here to learn more about the Corporate Transparency Act.