Changes in federal law require new reporting for small business owners

A federal law that only affected large corporations will now impact small business owners. The Corporate Transparency Act will now require all business entities, no matter the size, to report their Beneficial Ownership Information (BOI). The BOI are the names of those who own or control at least 25% of a business. This information is then submitted to a federal agency called the Financial Crimes Enforcement Network (FinCEN).

“This act came into effect at the beginning of this year,” said Catherine Donelly, a Senior Attorney in Legal Aid’s Community Engagement Practice Group. “It’s intended to close gaps in reporting about business ownership to assist in preventing federal financial crimes such as evading sanctions, terrorism funding, and federal fraud.”

Changes to the federal reporting law means that low-income entrepreneurs, those who currently own or will be forming a business, will be required to report the Beneficial Ownership Information. There is no fee to file the report, and it can be done online at www.fincen.gov/boi.

“It's not difficult to report. The barrier is really knowing that you need to report and that's why we're trying to get the information out there,” Catherine said.

Companies are only required to file once unless there have been changes to the owners or other information in the report, such as the business location. A company that was formed this year needs to file within 90 days of formation. Those formed in 2025 and after will have to file within 30 days and companies formed before 2024 will have to file before the end of the year.

The rules for sole proprietors are different.

“It should not affect those who are sole proprietors. Sole proprietors are those who are operating under their own name or a trade name,” said Catherine. “They don't have a business entity, so they don't have to report their ownership of the business entity.”

There are some businesses that are exempt from having to file the report. The most common exemptions would be for a nonprofit or tax-exempt organization.

“In fact, if you are a nonprofit and you're not sure if you are exempt, you might benefit from talking to an attorney to be sure,” said Catherine. “One of the places where you could do that is at a Legal Aid Brief Advice Clinic. The schedule for Brief Advice Clinics is on our website at lasclev.org.”

Information that is submitted is protected by FinCEN. There are only a few entities that FinCEN can share information with, including: federal national security and intelligence agencies; U.S., state, and local law enforcement; certain foreign law enforcement authorities who must submit a request to a federal agency regarding a treaty or international law; financial institutions; federal agencies that regulate banks in connection with these reports; and the U.S. Dept. of Treasury. There are penalties for the unauthorized sharing of this information as well as for those who fail to submit a report. These penalties include fines as well as prison.

To file the Beneficial Ownership Information and to learn more about The Corporate Transparency Act and exemptions go to www.fincen.gov/boi.

Are you a small business and need further assistance? Legal Aid may be able to help! Talk to an attorney at a Legal Aid Brief Advice Clinic. To find a location near you, go to lasclev.org and go to the “Events” tab. To apply for assistance, call 888-817-3777, or complete an online intake 24/7 at lasclev.org.

Tonya Sams is a Development & Communications Manager at The Legal Aid Society of Cleveland