Your small business faces thousands in fines if you miss this federal filing deadline

It’s October 2024. Have you filed your company’s Beneficial Ownership Information Report yet?

Under the federal Corporate Transparency Act (CTA), which went into effect on Dec. 31, 2023, nearly all small businesses and startups are required to report their owners and decisionmakers to the federal government. The deadline is quickly approaching: Businesses founded in 2024 have 90 days to file and those founded before 2024 have until Jan. 1, 2025. 

The legislators aim to the federal government as part of an effort to reduce business fraud. The document, called the Beneficial Ownership Information Report (BOIR) can be filed online. The financial consequences of missing the deadline are no joke — $591-a-day noncompliance fines can add up to more than $215,000 in penalties if ignored for a year, despite common misconceptions. 

“I thought it capped out at $10,000 initially,” John Williams, president of IncNow and the BOIR filing platform CTAboi, told Technical.ly. “But there is no cap on this civil fine.”

A flurry of lawsuits challenging the constitutionality of the CTA have popped up over the last year. A case filed in the Northern District of Alabama initially ruled that the CTA is unconstitutional. That ruling has been appealed, and is currently being adjudicated by a federal district Court in Oregon, where, Williams said, it’s likely it will be found to be constitutional.

“We’re really not going to have a final decision until the US Supreme Court weighs in on this, maybe a couple years out,” Williams said. “In the meantime, you basically have to comply because the deadline is coming up. You can’t wait out the court cases.”

For most startups and small businesses, that means it’s time to get your information filed. It’s possible to file for free directly on the Financial Crimes Enforcement Network website, but because even a typo can make you noncompliant, entrepreneurs can also file with the help of a lawyer, accountant or other resource. 

Filing complexities have surprised some business owners

Like any legal paperwork, filing BOIR correctly requires hurdles and intense specificity. It could mean business owners have left it unfinished.

There are plenty of businesses out there that have services that can help business owners through the process if they don’t feel confident that they can do it themselves for free — but be careful about scams like the one asking business owners to pay to have a fake BOIR form reviewed. 

According to anecdotal data from selling its own BOIR filing service, “a lot of [business owners] started the process, then they realized it was more complicated than they expected,” Ashley Robinson, head of communications at LegalZoom, told Technical.ly. “They kind of just stopped midstream.”

Businesses will need information for all owners of 25% of the business or more, including full legal names, birth dates, current addresses and a driver’s license or passport number. The BOIR documents also require information about the individuals who filed the business’s formation documents and the company’s major decisionmakers, such as board members or a company president, who are not owners.

In Community Property states — California, Arizona, Idaho, Louisiana, Texas, Nevada, New Mexico, Washington and Wisconsin — each owner’s spouse must also be listed as an owner, even if the spouse doesn’t have any other connection to the company.

Small mistakes are common in the filings reviewed by Williams so far, from misspelling the company name to transposing numbers in an address to submitting a headshot rather than their driver’s license or passport. 

And those are the easy parts of the report. Making sure everyone who needs to be reported is on the filing can be the main challenge that can hold up reporting. Don’t let that hold things up too much, though — if anyone involved can’t or won’t submit their information, Williams said to file anyway rather than risk not filing at all.

Exemptions for startups and small businesses are rare

If you haven’t looked into filing a BOIR because you don’t have many — or any — employees, it’s important to know that the number of workers is not an exemption in this case. 

Federal officials intended the CTA to make it harder for people to create illegal shell corporations with no business operations or assets, for money laundering, tax evasion or fraud. These fraudulent companies are, or at least appear, small.

There is one small business exemption, though: The sole proprietor, like a freelancer or contractor without a formalized business name. This exemption does not include single-member LLCs.

Other exemptions include nonprofit organizations, publicly traded companies and companies in certain highly regulated sectors such as finance. 

Your startup does not have to be profitable or even have any sales to be non-exempt from BOIR filing. If you have an LLC, LLP or are incorporated, you’re required to file.

Do not wait until the last minute to figure this out, Robinson said. 

“If the form is not filled out correctly, you’ll have to scramble and refile and try to kind of figure out what the issues are,” Robinson said. “You don’t want to be doing that after Christmas, right?”