Beneficial Ownership Reporting Requirements for Small Businesses: A CPA’s Complete Compliance Guide

Starting in 2024, millions of small businesses in the United States are now subject to new federal reporting obligations under the Corporate Transparency Act (CTA). This landmark regulation, administered by the Financial Crimes Enforcement Network (FinCEN), is designed to combat money laundering, terrorism financing, and other illicit activities by increasing transparency into who owns and controls companies.

The change represents one of the most significant compliance shifts in U.S. business regulation in recent years. For CPA firms advising small businesses, it is critical to understand which entities are impacted, what information must be reported, the required timelines, and the potential penalties for non-compliance.

This guide explains the rules, outlines the filing process, and provides practical advice for CPA firms helping clients prepare and file beneficial ownership reports.

Overview of the Corporate Transparency Act

Background

The Corporate Transparency Act was passed as part of the National Defense Authorization Act for Fiscal Year 2021. It requires certain U.S. companies to disclose details about their beneficial owners to FinCEN, a bureau of the U.S. Treasury.

Prior to this law, small businesses could be formed in most states without disclosing ownership information, making them vulnerable to misuse by bad actors. The CTA aims to close this loophole and bring the United States in line with global anti-money laundering standards.

Purpose of the Rule

The primary goals are to:

• Prevent anonymous shell companies from being used for illicit purposes
  
  
  
  
• Provide law enforcement with access to ownership information
  
  
  
  
• Increase transparency while balancing the compliance burden for small entities
  
  
  
  

What is a Beneficial Owner?

A beneficial owner is any individual who:

1. Exercises substantial control over a company
   
   
   
   
2. Owns or controls at least 25 percent of the company’s ownership interests
   
   
   
   

Substantial Control Includes:

• Serving as a senior officer (e.g., CEO, CFO, COO)
  
  
  
  
• Having authority over important decisions
  
  
  
  
• Having the ability to appoint or remove officers or board members
  
  
  
  
• Any other substantial influence over the company’s operations or finances
  
  
  
  

Ownership Interests Include:

• Equity (shares, stock)
  
  
  
  
• Voting rights
  
  
  
  
• Capital or profit interests
  
  
  
  
• Convertible instruments
  
  
  
  
• Any other arrangement that gives financial or decision-making influence
  
  
  
  

CPA firms should assess not just direct owners but also silent partners, nominee shareholders, and trust beneficiaries to ensure full compliance.

Who Must File?

Reporting Companies

A "reporting company" includes:

• U.S. domestic corporations, LLCs, or other entities created by filing with a secretary of state
  
  
  
  
• Foreign entities registered to do business in the U.S.
  
  
  
  

This includes most small businesses, including single-member LLCs and professional service corporations.

Exemptions

There are 23 specific exemptions, generally for companies already subject to federal oversight or reporting, such as:

• Publicly traded companies
  
  
  
  
• Banks and credit unions
  
  
  
  
• Insurance companies
  
  
  
  
• SEC-registered investment companies
  
  
  
  
• Accounting firms (depending on structure and regulation)
  
  
  
  
• Large operating companies with:
  
  
  
  
  
  • More than 20 full-time U.S. employees
    
    
    
    
  • A physical office in the U.S.
    
    
    
    
  • More than $5 million in U.S.-sourced revenue
    
    
    
    

CPA firms should confirm exemption eligibility using these three-pronged tests. If even one criterion is unmet, the entity must file.

What Must Be Reported?

A beneficial ownership information (BOI) report must include:

1. Reporting Company Information

• Full legal name
  
  
  
  
• Any trade name or "doing business as" (DBA) name
  
  
  
  
• Business address
  
  
  
  
• Jurisdiction of formation or registration
  
  
  
  
• IRS Taxpayer Identification Number (TIN)
  
  
  
  

2. Beneficial Owner Information

For each beneficial owner:

• Full legal name
  
  
  
  
• Date of birth
  
  
  
  
• Residential address
  
  
  
  
• Unique identifying number from a government-issued ID (e.g., passport or driver’s license)
  
  
  
  
• A copy of the identification document
  
  
  
  

3. Company Applicant (for entities formed after January 1, 2024)

• The person who filed the formation documents (usually an attorney or formation agent)
  
  
  
  
• Same personal details as required for beneficial owners
  
  
  
  

CPA firms should implement checklists to gather this data consistently.

Filing Deadlines and Updates

Initial Reports

• For existing companies formed before January 1, 2024: File by January 1, 2025
  
  
  
  
• For companies formed on or after January 1, 2024: File within 30 days of formation (extended to 90 days for entities formed in 2024 as a transitional rule)
  
  
  
  

Updates

• Changes in ownership or control must be reported within 30 days
  
  
  
  
• Corrections to previously submitted information must be made within 30 days of discovery
  
  
  
  

CPA firms should set up reminder systems or compliance calendars to ensure deadlines are met.

How to File

Filings are submitted electronically through FinCEN’s Beneficial Ownership Secure System (BOSS). There is no fee for filing.

Steps:

1. Create a FinCEN ID (optional but simplifies future updates)
   
   
   
   
2. Gather all required company and ownership information
   
   
   
   
3. Upload scanned ID documents for each beneficial owner
   
   
   
   
4. Submit and retain confirmation receipt
   
   
   
   

CPA firms may file on behalf of clients but must obtain written authorization. Document retention policies should include digital backup of all filed reports.

Penalties for Non-Compliance

Failure to comply can result in serious consequences:

• Civil penalties: Up to $500 per day for each day the violation continues
  
  
  
  
• Criminal penalties: Fines up to $10,000 and/or imprisonment for up to two years for willful violations
  
  
  
  

Inaccurate or false information is also subject to penalties. CPA firms must advise clients not to take these filings lightly, even if the ownership structure is simple.

Implications for CPA Firms

CPA firms are uniquely positioned to help clients navigate the new reporting rules. However, they also face new risks and responsibilities.

Opportunities:

• Provide beneficial ownership compliance as a billable service
  
  
  
  
• Use compliance checklists during tax preparation or entity formation
  
  
  
  
• Offer ongoing monitoring for updates and changes in ownership
  
  
  
  

Risks:

• Filing incorrect or incomplete data can expose firms to liability
  
  
  
  
• Overlooking exempt vs. non-exempt status may create audit exposure
  
  
  
  
• Some firms may need to file reports for their own entities
  
  
  
  

Firms should consider creating internal training programs and standard operating procedures for CTA compliance.

Client Communication and Documentation Strategy

Educating clients is essential. CPA firms should:

• Send email alerts and newsletters outlining the new rules
  
  
  
  
• Include a CTA checklist during client onboarding or annual reviews
  
  
  
  
• Provide template authorization forms for report filing
  
  
  
  

Documentation should include:

• Signed authorization to file BOI reports
  
  
  
  
• Owner verification forms with ID copies
  
  
  
  
• Date-stamped reports and confirmation receipts
  
  
  
  

Using a secure document management platform can help centralize storage.

Frequently Asked Questions (CPA Edition)

Can CPA firms file on behalf of clients?

Yes, but written authorization is required. Keep signed documentation for compliance purposes.

Does every LLC have to file?

Almost all LLCs do unless they meet one of the 23 exemptions. Most single-member LLCs will need to file.

What happens if an owner changes but it is not reported?

A failure to update within 30 days triggers penalties. CPA firms should advise clients to report changes immediately.

Can I use a business address for the beneficial owner?

No. The residential address of the individual must be used.

What if a business has multiple owners?

All owners meeting the 25 percent threshold or having substantial control must be included in the report.

Conclusion

Beneficial ownership reporting under the Corporate Transparency Act introduces new compliance responsibilities for millions of U.S. businesses and their advisors. CPA firms must not only understand the law but proactively build systems to help clients meet deadlines, gather accurate data, and avoid penalties.

With a clear strategy, proper documentation, and client education, CPA firms can turn this regulatory change into an opportunity to expand advisory services and deepen trust with clients.

This is not a one-time filing for most businesses. Ongoing monitoring, updates, and communication are critical. Firms that integrate these workflows now will stay ahead of the curve and avoid scrambling later.

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