Updated Rules on Corporate Transparency Act Reporting May Impact Current and Former Freelance Businesses

If you are not familiar with The Corporate Transparency Act (“CTA”) and what it means for freelance businesses, you are not alone. This mandatory compliance regulation came into effect on January 1, 2024, and it is estimated that only a very small percentage of the 32.6 million private companies that have to report, for the first time, have done so. 

Considering that the deadline is January 1, 2025 for organizations to report information about their “beneficial owners” to the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”), if this is not already on your radar, it needs to be or you risk significant penalties for your business and potentially imprisonment for yourself.

The CTA’s reporting requirements apply to corporations, limited liability companies, limited partnerships, limited liability partnerships, professional corporations, professional limited liability companies, business trusts and other types of legal entities. Here’s a quick recap of the CTA deadlines and obligations for freelance business owners:

1. Companies formed prior to 2024 must file a report under the CTA no later than January 1, 2025. 
2. Companies established in 2024 have 90 days to file. 
3. Companies formed in 2025 or later must file an initial report within 30 days after formation. 
4. If there is any change to previously reported information about the reporting company or its beneficial owners, companies must file an updated report with FinCEN within 30 days.

If you have an “inactive” freelance entity that you created but no longer use, beware that you likely will still need to file according to the CTA guidelines because exemptions for inactive companies are limited to only the following instances: 

• Your business was in existence on or before January 1, 2020.
• You are not engaged in an active business within this entity.
• Your freelance entity is not directly or indirectly owned by a foreign person.
• Your business has not experienced an ownership change in the preceding 12-month period.
• Your business not sent or received any funds greater than $1,000 either directly or through any financial account in which the entity or an affiliate has an interest, in the preceding 12-month period; 
• Your business does not hold any assets in the U.S. or abroad, including any ownership in other entities. 

Beyond entities that have been inactive for many years, you also cannot avoid the CTA Beneficial Ownership filing requirements by dissolving a reporting company prior to the reporting deadline (January 1, 2025 for companies formed prior to 2024 and 90 days after formation if formed in 2024). Your freelance business dissolution would have had to have happened prior to January 1, 2024 to make this a viable case for non-reporting.

Regardless of the age of your freelance business, essentially, if it is active at any time in 2024, you will need to report the following information for each owner including”

• Legal name
• Date of birth
• Current residential address (or business address for a company applicant)
• A unique identifying number from a current passport, driver’s license, etc., and an image of the document. 
• In addition you need to report your full legal entity name (as well as any trade or d/b/a names), address of your principal place of business, jurisdiction of organization and a unique identifying number such as an employer identification number.  

Another key point here is that if your freelance business was created before or on January 1, 2024 has changes to any of the above information for any owners (or you add an owner) you must update your reporting within 90 days of receiving notice of the changes. For those companies created or registered in 2025 or later, the timeframe for reporting these changes is within 30 days. 

Reporting obligations also apply to freelance companies that may cease to exist as legal entities before their initial beneficial ownership reports are due (prior to January 1, 2025). However, if this is the case you only need to file one initial BOI report.

Another issue to consider as you make plans to take care of your CTA filings is whether your state has its own requirement for filings. This is the case for freelance businesses established in New York State that must also file under the New York LLC Transparency Act, (or NYLTA). The NYLTA goes into effect on January 1, 2026 and New York’s Department of State has yet to announce the regulations for implementing the legislation.

California and Maryland are also considering enacting similar state-level CTA requirements. 

Be sure to check on the state-level CTA requirements in the locations you do business and with an accounting professional who can assist you with filing.