Martin Shenkman, CPA, JD
Martin M. Shenkman, CPA, JD, estate and tax-planning attorney based in New York City. He is coauthor of The Business Owner’s Guide to the Corporate Transparency Act. ShenkmanLaw.com
Effective this year, the Corporate Transparency Act (CTA) requires small businesses and entities to file ownership information with the Financial Crimes Enforcement Network
(FinCEN), a division of the US Treasury Department. The law was passed to combat tax fraud through shell companies.
Who is affected? Anyone who owns a small business that has incorporated or is an LLC, including home-based businesses and single rental properties. FinCEN estimates that 32 million “entities” must file. While the National Small Business Association successfully sued to have the requirement declared unconstitutional, the legal fight is not over, so proceed as if the requirement were in effect for now.
What is required? Each entity must file with FinCEN the entity address, founding documents and personal information for “beneficial owners”—people with 25% or greater controlling interest or authority over significant decisions. Entities predating 2024 have until January 1, 2025, to file. Those created in 2024 have 90 days after their creation date…those created after January 1, 2025, will have 30 days. Penalty for failure to file is up to $500 per day, plus possible jail time.
How to proceed. Filing is free at FinCEN.gov/boi. You may have to ask employees or other “beneficial owners” for personal information. Fortunately, FinCEN.gov lets individuals receive a FinCEN identifier number. Instead of asking beneficial owners for their information, they can go onto FinCEN.gov/boi to obtain a FinCEN ID number. You can file that instead of entering their information. Even if you’re the only beneficial owner, you should get a FinCEN ID for your CTA filing. As the person responsible for the reporting entity, you’re required to amend the entity’s filing with any subsequent changes to beneficial owners’ personal information, including driver’s license number and mailing address. Filing the FinCEN ID relieves the reporting company of that chore.
Don’t panic…but act. The biggest danger is not filing. But if you file incorrect information, you may face severe penalties. If you’re in doubt about who is a beneficial owner, err on the side of caution and include that person.
Most people can file without professional help. FinCEN has a Small Entity Compliance Guide that should provide sufficient information for simple entities with one or two beneficial owners. If your situation is complicated, you may need the help of a lawyer or accountant.
Also: If you have an older entity that names individuals who are no longer active beneficial owners (for example, a former employee who is still listed as an officer), make the legal changes necessary to get those names off the documents before doing the CTA filing.
