Corporate Transparency Act: What Every Founder Must File

Most founders have heard of the Corporate Transparency Act (CTA) but haven't actually read it — because it reads like a compliance manual written by lawyers for other lawyers. Here's what it actually requires, who it hits, and what happens if you ignore it.

Disclaimer: This article is for general informational purposes only and is not legal advice. Contact an attorney for guidance specific to your situation.

Why This Law Exists

Congress passed the CTA in 2021 to crack down on anonymous shell corporations used for money laundering, tax evasion, and terrorism financing. The enforcement mechanism is simple: small companies must tell the government who actually owns and controls them.

The scale of the target is enormous. The SBA reported that 27,104,006 businesses — 81.7% of all U.S. small businesses — have no paid employees. The CTA is designed to bring those entities into view.

In one sentence: small companies are required to report to the government who has control and ownership.

Who Has to File

Almost every early-stage startup will fall inside the reporting requirement. Exemptions exist for certain non-profits and pre-revenue entities, but they are narrow. If you are unsure whether your structure qualifies for an exemption, ask a lawyer.

You are required to file if your company meets any one of these conditions:

• Fewer than 25 employees
• No physical office location
• Less than $5M in gross annual sales

To be exempt, your company must clear all three thresholds — not just one.

When to File

The deadline depends on when your company was formed.

• Formed before January 1, 2024: You have the full 2024 calendar year to complete the initial filing
• Formed on or after January 1, 2024: You have 90 days from formation to file

Updates are where founders most often get caught off guard. Any change or error in the filing must be corrected within 30 days. Triggering events include:

• A beneficial owner moves to a new address
• A new executive is hired into a C-suite or similarly senior role
• A passport or government ID is reissued with a new number

This ongoing obligation is the hardest part of staying compliant, and the one most likely to create exposure long after the initial filing is done.

What You Actually Need to Submit

The filing is completed directly on the FinCEN website at https://www.fincen.gov/boi. Tools like BOI Zen can also walk you through the process and help you stay current with updates.

The report covers three categories of information.

Beneficial Owners

Anyone who either exercises substantial control over the company (direct or indirect) or owns/controls 25% or more of ownership interest. For each person you need:

• Full legal name
• Date of birth
• Residential street address
• A unique identifying number from a current U.S. passport, state/local ID, driver's license, or foreign passport — plus the issuing jurisdiction
• An image of the ID document used above

Company Applicants

The person (or people) who filed the document creating the company, plus anyone primarily responsible for directing that filing. The same five data points listed above apply here too.

Individuals can also file their information directly with FinCEN to receive a FinCEN ID number, which can then substitute for the full data set in the company filing.

The Company Itself

• Legal name and any trade names (DBAs)
• U.S. business address
• State or country of incorporation
• Tax identification number

What Non-Compliance Costs You

The penalties are not symbolic. Civil fines run $500 per day the violation continues, capped at $10,000. Criminal penalties can include up to two years in prison.

If you raise a round and FinCEN later discovers an unfiled or outdated report, that fine accrues daily — directly out of the capital you just closed.

Further Reading

These resources go deeper on the legal details:

• The Corporate Transparency Act overview — IACA
• What Startups Need to Know About CTA Compliance — UChicago Law
• Beneficial Ownership Information Reporting FAQ — FinCEN

For startup-specific legal support, Bowery Legal works with early-stage companies on compliance matters like this.

For a deeper look at alternative capital structures — including how Kaustav Das at Efficient Capital Labs uses revenue-based financing to fund SaaS growth without the VC dependency — see the linked resources.

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