Corporate Transparency Act Compliance Generating Confusion for Small Businesses

A significant number of small businesses remain confused about their Corporate Transparency Act compliance obligations as the filing deadline approaches. A survey by Wolters Kluwer reveals that 33% of small businesses that are required to report beneficial ownership information (BOI) incorrectly believe they are exempt from the CTA. This misbelief is particularly pronounced among businesses with less than $500,000 in annual revenue.

Over half of those surveyed are uncertain about or believe the law does not apply to them, with 16% indicating no intention to file BOI details. This number rises to 36% for businesses with revenues below $500,000.

The survey highlights a major disconnect regarding CTA compliance, with 39% recognizing the law’s relevance and 23% unsure. Non-compliance can result in significant penalties, including fines and possible incarceration.

Contributors from Wolters Kluwer wrote about the CTA for Today’s General Counsel earlier this year. You can read their insights here and here.

Rupak Venugopal from Wolters Kluwer emphasizes the importance of understanding the reporting requirements and available exemptions. “A significant portion of respondents mistakenly believe their organizations’ annual revenue or employee counts make them too small for eligibility. We strongly encourage all businesses to familiarize themselves with BOI reporting requirements and the specific exemptions listed by the CTA and the Financial Crimes Enforcement Network (FinCEN).”

The survey, conducted from June 21 to July 1, 2024, involved 302 small U.S. businesses, each with less than $5 million in revenue and fewer than 20 employees. It also found that law firms are a primary resource for BOI compliance, being cited three times more frequently than CPA/accounting firms.