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Millions of small businesses have a new requirement to file ownership information with the government — but most who’ve done it so far say it's easy.
That comes from a survey by advocacy organization Small Business Majority of small-business owners filing what are known as Beneficial Ownership Information reports. It's a new requirement for the smallest of businesses that kicked in Jan. 1, as part of the Corporate Transparency Act.
Businesses with fewer than 20 employees founded or registered to do business in the United States before Jan. 1 have until Jan. 1, 2025 to file information with the Department of the Treasury’s Financial Crimes Enforcement Network. That information includes names, dates of birth, addresses and other identifying information about its owners. New businesses founded in 2024 have 90 days to file after their registration is complete. In 2025, that 90-day period shrinks to 30 days.
A recent Small Business Majority national opinion poll found 58% of small-business owners are aware of the new law, and about 44% had already filed a BOI report. Of those who have filed, 68% said it was easy, and only 18% found completing it difficult.
“We are glad that the new requirement to file a Beneficial Ownership Information (BOI) Report has been easy for the majority of the small-business owners who have filed,” said John Arensmeyer, founder and CEO of Small Business Majority, in a statement to The Playbook. “Our research shows that while the filing process has been easy, many small businesses still need to be educated about the new requirements.”
He said it’s important for the Treasury Department to prioritize outreach campaigns and ensure user-friendly information is easily accessible to small businesses throughout 2024.
Other studies indicate more work needs to be done on educating small-business owners. A recent poll by Wolters Kluwer CT Corp. found 26% of those surveyed said they were ready to meet the new reporting rule — up from 18% in November.
Those who said they were completely unprepared for the new rule dropped from 38% in November to 31% in January.
“There is a noticeable uptick in the market, not only in terms of greater awareness but also in preparations among those who realize they are subject to the beneficial ownership reporting requirements,” said Rupak Venugopal, vice president of beneficial ownership for Wolters Kluwer’s financial and corporate compliance division, in a news release. “But despite this upward trend, there remains a considerable lack of awareness among impacted businesses, and we are working diligently to help change that dynamic through a growing ecosystem of partnerships that can provide secure and trustworthy resources to comply.”
Opposition to the Corporate Transparency Act
The new reporting requirement has drawn some opposition.
The National Small Business Association filed a lawsuit in the U.S. District Court for the Northern District of Alabama, claiming the act infringes on state powers over the formation of entities and exceeds Congress’ power to regulate commerce. The association said a violation by a small-business owner, unintentional or not, could result in up to $10,000 in fines and two years in prison.
But those penalties are only for willful violations of the law, said Gary Kalman, U.S. director of Transparency International, an anti-corruption coalition that supports the reporting requirement and has filed an amicus brief in court in support of the legislation. Kalman said worries over the cost of compliance are overblown, as most small-business owners will have the required information at hand.
“The first thing that people need to understand is that this is not filling out a tax return or providing financial information or business justification. It’s literally saying who owns you and who owns the company,” Kalman said.
He said while there are around 31 million small businesses in the United States, the vast majority — around 30 million — are owned by one or two people, and those owners are not confused about who owns the business. The businesses that have complex ownership structures are likely to have the resources to report their ownership without problems, he said.
Why do small businesses need to report ownership information?
While detractors have said small businesses are largely unaware of the new requirement, most service providers will be. That means when small businesses use their lawyer, accountant or other service provider, they likely will be told or reminded of the requirement.
Kalman said small businesses that honestly forget to report their ownership information or update it are not targets for enforcement.
“We need to stop spreading around the rhetoric that people are going to mistakenly get themselves in trouble,” Kalman said. "What FinCEN is looking for are criminal networks, national security risks. That's who they are looking for. They are not looking for the guy or the woman who owns a company who forgot to file some paper with the IRS.”
The aim instead is to help catch anonymous companies that supporters say are used to launder money, fund terrorist networks and allow bad actors to do business where they are not allowed, he said. While the ownership database is not public, it will be accessible by law-enforcement agents, giving them another tool to locate and crack down on criminal enterprises.
Before the law was passed, people could get companies registered with an agent without disclosing who ultimately owns the company. Now, someone has to put a name down as the owner, providing at least a lead or link for law enforcement to follow, Kalman said.
As for the litigation, Kalman said he is optimistic the law will survive the challenge.
“Any time anything is taken to court, you have to take it seriously; you can’t ignore it. The Treasury Department is vigorously defending it,” he said. “At the end of the day, we think the law will withstand judicial scrutiny.”
