Corporate Transparency Act
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The Corporate Transparency Act (CTA) was enacted by Congress on January 1, 2021, as part of the National Defense Authorization Act.
The CTA includes significant reforms to anti-money-laundering laws and is intended to help prevent and combat money laundering, terrorist financing, corruption, and tax fraud. The CTA establishes Beneficial Ownership Information (BOI) reporting as a requirement for corporations, limited liability companies, and other similar entities formed or registered to do business in the United States.
The Beneficial Ownership Information (BOI) reports are filed with the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of Treasury.
Five Essential Things to Know
- Most active corporations, LLCs, and other businesses formed by filing a document with a Secretary of State’s office in the United States. Contact FinCEN to confirm whether your business is required to report.
- Publicly traded companies, banks and other financial institutions, tax-exempt nonprofits, public utilities, and some large businesses. Most are already subject to regulatory requirements; (Small Business Compliance Guide, Chapter 1.2).
- Reporting companies will report beneficial ownership through FinCEN’s website.
- A Beneficial Owner is any individual who either exercises substantial control over a company or owns or controls at least 25% of the ownership interest. If a business entity owns or controls at least 25% of a reporting company, then its Beneficial Owner(s) must also be reported.
- Company Applicants are individuals who, after 1/1/2024, directly submitted the formation or registration document for a company, or were primarily responsible for that submission. There may be up to two Company Applicants.
- Company legal name and current principal place of business street address in the U.S.
- Any assumed business name (DBA) used by the company
- Taxpayer identification number (TIN or EIN)
- Each Beneficial Owner’s name; birthdate; residential street address; and an identifying number with an image of an acceptable ID (e.g., driver’s license or passport).
- Each Company Applicant’s name; birthdate; residential street address, (applicants whose business is submitting registration documents may use their business address); and an identifying number with an image of an acceptable ID (e.g., driver’s license or passport).
- There is no fee, and this is not an annual report. Only updates and corrections are necessary.
- If your company was created or registered prior to 1/1/2024, you have until 1/1/2025 to report.
- Companies created in 2024 must report within 90 days.
- Failure to report is punishable with a civil penalty up to $500/day.
More Information
Reporting companies began reporting beneficial ownership information to FinCEN on January 1, 2024.
- Businesses formed before January 1, 2024 must report within one year (before January 1, 2025).
- New businesses formed or registered after January 1, 2024, must report within 90 days of creation or registration. New businesses must also report company applicant information.
Certain businesses, referred to as “reporting companies,” will be required to register beneficial ownership information to FinCEN. Reporting companies include domestic and foreign (formed outside the U.S.) businesses.
Domestic reporting companies are corporations, limited liability companies, and other entities that are formed to do business in the United States by submitting a formation document with a Secretary of State or any similar office under the law of a state or Indian tribe.
Foreign reporting companies are corporations, limited liability companies, and other entities that are formed in a foreign country and are registered to do business in the United States by submitting a document with the secretary of state or any similar office under the law of a U.S. state or Indian tribe.
The CTA lists 23 categories of entities that are exempt from reporting. The list of exemptions may be viewed here. (part C2)
Many of the exempt categories are already subject to similar regulation such as banks, credit unions, tax-exempt entities, public utilities, and some large business entities.
Also, entities that are not formed by submitting a formation or registration document to a Secretary of State or similar office such as a sole proprietorship or general partnership are exempt from reporting.
For an entity to qualify as a large business entity, the entity must have:
- Filed a tax return in previous year showing more than $5 million in U.S. sourced gross receipts or sales.
- 20 or more full-time employees in the U.S.
- Operating presence at a physical office in the U.S. (not including a residence or shared space, except spaces shared with affiliates).
Yes, if a business entity owns 25% or more of the reporting company, then the individual beneficial owners of that entity must be reported.
There may be up to two individuals who qualify as a company applicant.
- The individual who directly submitted the document that formed or registered the reporting company.
- The individual who is primarily responsible for directing or controlling the submission of the formation/registration document.
If only one person was involved in submitting the formation/registration document, then only one person qualifies as the company applicant. No reporting company may have more than two company applicants.
Only reporting companies formed or registered on or after January 1, 2024 must report company applicant information. It does not apply to an entity formed or registered before that. Additional information on determining the company applicant can be found here: Beneficial Ownership Information, (part E).
Company information
A reporting company must provide the following information about itself:
- The legal name of the company.
- Any assumed business name (DBA or "trade name") used by the company.
- The current street address of its principal place of business. If the principal place of business is not in the U.S., then the company must report the address from which it conducts business in the U.S.
- Taxpayer identification number (TIN or EIN).
The company must indicate the type of report being submitted (initial report, correction of a prior report or an update to a prior report).
Beneficial Owner Information
A reporting company must provide the following information for each beneficial owner:
- The individual’s legal name; date of birth and residential street address.
- A unique identifying number from an acceptable identification document.
- The name of the state or jurisdiction that issued the acceptable identification document.
- An image of the acceptable identification document.
Company Applicant Information
A reporting company, created on or after January 1, 2024, must provide the following information for the company applicant:
- The individual’s legal name; date of birth and residential street address.
- If the company applicant is an individual who engages in the business of business formation (i.e., an attorney, paralegal or service company employee) and submits formation or registration documents in that course of business, then the address submitted may be the company applicant’s business address instead of the residential address.
- A unique identifying number from an acceptable identification document.
- The name of the state or jurisdiction that issued the acceptable identification document.
- An image of the acceptable identification document.
An acceptable identification document is one of the following:
- A non-expired driver’s license issued by a U.S. jurisdiction.
- A non-expired identification document issued by a U.S. jurisdiction or local government, or Indian Tribe used for the purposes of identifying the individual.
- A non-expired passport issued by the U.S. Government.
- If the individual does not have any of the three forms of identification described above, then the reporting company may provide the identifying number from a non-expired passport issued by a foreign government.
No, there is no fee for submitting the report. (A solicitation letter offering to file a paper form is not from FinCEN.)
Reporting companies submit reports electronically through FinCEN’s E-Filing website. Select "File BOIR".
No, the law only requires an initial report, updated report (when necessary), and a corrected repot (when necessary).
The CTA authorizes FinCEN to collect and share this information with authorized government authorities and financial institutions, in certain circumstances. FinCEN is currently in an active rulemaking process on the beneficial ownership access rule and forms.
Yes, updates and corrections must be submitted to FinCEN within 30 days of the change. Updates include a change of address when a beneficial owner moves to a new address.
The CTA provides that willfully reporting or attempting to report false or fraudulent beneficial ownership, or willfully failing to make updates to the data shall be punished with a civil penalty up to $500/day while the violation continues, up to $10,000 and up to two years in prison.