A sweeping new federal reporting requirement under the Corporate Transparency Act could expose millions of small business owners to severe penalties if they fail to file ownership information by the January 1, 2025, deadline. The law, aimed at combating illicit finance, mandates that an estimated 32.6 million businesses—including corporations, limited liability companies, and similar entities—report their beneficial owners to the Treasury Department's Financial Crimes Enforcement Network (FinCEN).

As of December 1, only about 9.5 million reports had been filed, representing roughly 30% of the estimated total. Businesses that miss the deadline risk civil penalties of up to $591 per day, criminal fines of $10,000, and potential imprisonment.

“To a small business, suddenly you’re staring at a fine that could sink your business,” said Charlie Fitzgerald III, a certified financial planner in Orlando.

The rule defines a “beneficial owner” as an individual who owns at least 25% of a company or exercises “substantial control.” Required information includes the owner’s name, birth date, address, and identification details. Companies formed before 2024 must file by January 1; those created in 2024 have 90 days from formation, while entities established in 2025 or later will have 30 days.

Certain exemptions exist, including for companies with more than $5 million in annual sales and over 20 full-time employees. Many large firms and regulated entities are already exempt due to existing disclosure rules.

Despite a federal injunction issued on December 3 that temporarily halts enforcement of penalties, experts urge businesses to comply. “The deadline itself hasn’t changed. It just changes enforcement of the law,” said Erica Hanichak of the Financial Accountability and Corporate Transparency Coalition. FinCEN has indicated it will focus on willful violations and offers a 90-day grace period to correct mistakes after the deadline.

Treasury officials have launched a broad outreach campaign, but awareness remains low. The S-Corporation Association of America warned in October that the “vast majority” of businesses had not yet filed, risking widespread noncompliance.