A Guide to the Corporate Transparency Act (CTA)

Overview

The Corporate Transparency Act (CTA) requires certain entities to report their beneficial ownership information to enhance transparency and combat illicit activities. This guide summarizes the key requirements and exemptions. Understanding the requirements and exemptions can help companies ensure compliance. This guide is intended as a high-level overview and summarizes information contained at the FinCEN website (https://boiefiling.fincen.gov/) and the related FAQs (http://www.fincen.gov/boi-faqs).

As of Jan. 1, 2024, many entities (e.g., corporations, LLCs, LPs, etc.) are subject to a new reporting requirement that was enacted by Congress as part of the CTA. The CTA creates a new beneficial ownership information (BOI) reporting requirement as part of the U.S. government’s efforts to make it more challenging to hide or benefit from their illicit gains through shell companies or other opaque ownership structures.

Companies required to report are called reporting companies. There are two types of reporting companies:

• Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States. A domestic entity such as a statutory trust, business trust, or foundation is also a reporting company if it was created by the filing of a document with a secretary of state or similar office.

• Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.  This also includes entities that are formed under Tribal law or domiciled on tribal land, including captives and reinsurance companies.
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The 23 types of entities listed below may be exempt from the reporting requirements.

These exceptions are explained more fully on the FinCEN website referenced above.

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Determining whether an entity qualifies for an exemption is a legal matter and must be ascertained by legal counsel.

There is a specific exemption for large operating companies which may be applicable to many entities. A company may qualify as a "large operating company" if it meets all the following criteria:

• The company has more than 20 full-time employees.
• The company has more than $5 million in gross receipts or sales in the previous year.
• The company must be operating in the U.S.

Beneficial ownership information reports are submitted to the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) BOI E-Filing website (https://boiefiling.fincen.gov).

The due date for initial reports depends upon when the reporting entity was created. Entities created prior to January 1, 2024, must file their initial report no later than January 1, 2025. Entities created on or after January 1, 2024 and before January 1, 2025, must file their report within 90 calendar days after the entity’s creation. Entities created on or after January 1, 2025, must file their report within 30 calendar days after the entity’s creation. Failure to timely submit a required report may result in civil and criminal penalties. There is no fee for submitting your beneficial ownership information report to FinCEN. Entities that cease to exist prior to the deadline may have to file if they existed after January 1, 2024.

Required information

Companies formed on or after January 1, 2024 must report information about the company itself, company applicants, and beneficial owners.

A company applicant is an individual who either directly filed the document that created or registered the company, or if more than one person was involved in filing, the individual who is primarily responsible for directing or controlling the filing. Companies formed before January 1, 2024 are not required to report information about company applicants.

A beneficial owner is an individual who directly or indirectly:

• Exercises substantial control over the reporting company, or
• Owns or controls at least 25% of the reporting company’s ownership interests.

An individual can be a beneficial owner through substantial control, ownership interests, or both, and a reporting company may have multiple beneficial owners.  Individuals who exercise substantial control include, but are not limited to, the President, CEO, COO, CFO, General Counsel or any other individual who has the authority to make or influence important decisions.

A reporting company must provide the following:

• Legal name;
• Any trade names, “doing business as” or “trading as” names;
• The current street address of its principal place of business if that address is in the United States (for example, a U.S. reporting company’s headquarters), or, for reporting companies whose principal place of business is outside the United States, the current address from which the company conducts business in the United States (for example, a foreign reporting company’s U.S. headquarters);
• Its jurisdiction of formation or registration; and
• Its Taxpayer Identification Number (or, if a foreign reporting company has not been issued a TIN, a tax identification number issued by a foreign jurisdiction and the name of the jurisdiction).

Beneficial owners or company applicants must provide either:

•  The individual’s FinCEN identification number, or
•  All of the following information
  • The individual’s name;
  • Date of birth;
  • Residential address (if the company applicant works in corporate formation—for example, as an attorney or corporate formation agent—then the reporting company must report the company applicant’s business address); and
  • An identifying number from an acceptable identification and the name of the issuing state or jurisdiction of identification document as well as an image of the identification document.

Acceptable forms of identification include a non-expired U.S. driver’s license, non-expired passport, or non-expired identification document issued by a U.S. state or local government or Indian Tribe.

Updated Reports

If there is any change to the required info

As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues, adjusted for inflation.  

A person who willfully violates the BOI reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.

For more details, please refer to information and FAQs on FinCEN’s website at https://www.fincen.gov/boi.

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