The California Corporate Transparency Act: What Small Business Owners Must File

The Hedge | Brutal Honesty Over Hype Since 2008

The federal Corporate Transparency Act (CTA), which took effect January 1, 2024, requires most small businesses to file beneficial ownership information with the Financial Crimes Enforcement Network (FinCEN) — a branch of the U.S. Treasury Department. After a turbulent legal history including a period of injunction, the CTA is now in effect and enforcement has resumed. California business owners who haven’t filed are out of compliance and face potential penalties.

Who Must File

The CTA applies to “reporting companies” — corporations, LLCs, and other entities created by filing a document with a state secretary of state. Exemptions include large companies (more than 20 full-time employees, more than $5 million in revenue, and a physical U.S. office), publicly traded companies, banks, insurance companies, and certain other regulated entities. Most California small businesses — the LLCs and corporations that power the state’s economy — are reporting companies required to file.

What Must Be Filed

Reporting companies must disclose to FinCEN: the company’s legal name, address, jurisdiction of formation, and EIN; and for each beneficial owner (anyone who owns or controls 25% or more of the company, or who exercises substantial control over the company), their full legal name, date of birth, current residential address, and a copy of a government-issued photo ID. This information is not publicly disclosed — it goes into a non-public federal database accessible to law enforcement and financial institutions.

The Deadlines and Penalties

Companies formed before January 1, 2024 had until January 1, 2025 to file. Companies formed in 2024 had 90 days from formation. Companies formed in 2025 and after have 30 days from formation. Penalties for willful non-compliance can reach $591 per day (inflation-adjusted) and up to $10,000 in criminal fines. For most small business owners, filing is a straightforward 30-minute task at boiefiling.fincen.gov. The penalties for non-filing far exceed the compliance burden.

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