The Corporate Transparency Act

The Corporate Transparency Act (CTA) is upon us. It took effect on January 1, 2024, and imposes a new federal filing requirement for most corporations, limited liability companies (LLCs), and other business entities.

Corporations, LLCs, and other entities subject to the CTA are called “reporting companies.” People who form new reporting companies during 2024 must file a beneficial ownership information (BOI) report with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) within 90 days of forming the company.

The owners of reporting companies created before 2024 must also file a BOI report, but they have until January 1, 2025 (but think December 31, 2024).

Some businesses are exempt from filing—for example, large operating companies, which the CTA defines as those with over 20 employees and $5 million in income. There are other, narrower exemptions as well.

The BOI report must contain the name, the birth date, the address, and an ID number and image of that ID for each “beneficial owner” of the reporting company. These are the human beings who (1) own or control at least 25 percent of the company or (2) exercise “substantial control” over the company.

The BOI report is filed online at a new federal database called BOSS (an acronym for Beneficial Ownership Secure System). There is no filing fee.

Government law enforcement and security agencies will use the data from BOI reports to help combat money laundering, tax evasion, terrorism, and other crimes. It will not be available to the public.

For me, this is more than evasive, it is intrusion masked as a public service. While the courts have blocked it for now, I’m sure the Government will find a way to stick its nose further and further in. Therefor, prepare to give up the information and avoid the heavy fees.

Naturally, people have lots of questions about the BOI report filing requirements—for example:

• Do you have to file a BOI report if you own a single rental property in an LLC? (Yes.)
• Do you have to file 10 BOI reports if you own 10 LLCs? (Yes.)
• Can certified public accountants, enrolled agents, and other non-lawyers file BOI reports for clients without running afoul of unauthorized practice of law rules? (Unclear.)
• Are registered agents responsible for filing the BOI report? (No.)
• Do the self-employed have to file? (No.)
• Do I need to list a street address in the BOI report? (Yes.)
• Do I need to list my Social Security number in the BOI report? (No.)
• Do I need to list my attorney in the BOI report? (Maybe.)
• Must I file an updated BOI report if a beneficial owner leaves the company? (Yes.)
• Do I have to list my minor child in a BOI report? (No.)
• Will criminals file BOI reports? (Who knows?)

The Corporate Transparency Act (CTA) is primarily an Anti Money Laundering move with significant implications for the personal privacy of small business owners:

The Corporate Transparency Act, enacted in January 2021, is increasingly seen not just as a regulatory measure but as a significant anti-money laundering initiative. This perspective comes amid concerns about its profound implications for the personal privacy of small business owners.

Highlighting these concerns, a pivotal development occurred in Alabama. A federal district court ruled that the Corporate Transparency Act (CTA), P.L. 116-283, which mandates businesses to disclose beneficial ownership information (BOI), contradicts the constitution. In the case of National Small Business United v. Yellen, No. 5:22-cv-1448-LCB (N.D. Ala. 3/1/24), the court favored the plaintiffs, which included the National Small Business Association, representing over 65,000 members.

The court acknowledged the legislation’s well-intentioned goals. However, it found the government’s claim—that Congress has the authority to regulate millions of entities and their stakeholders upon acquiring formal corporate status from a state—unsupported by legal precedent. The ruling stated that the act oversteps the constitutional boundaries set for the legislative branch and fails to connect adequately to any enumerated power, thus not constituting a necessary or proper means to achieve Congress’s policy objectives.

I truly believe this will go nowhere. So kick those emails to the curve that will have you panic or pay. There’s no need currently.