On Jan. 1, the Corporate Transparency Act (CTA) went into effect. In short, the CTA requires certain “reporting companies” to disclose the identity of their beneficial owners to the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) through an online registry maintained by FinCEN. Below is a brief summary of the CTA’s requirements and what they will mean for business entities.

What Is a ‘Reporting Company’? Are Any Companies Excluded from the CTA?

A “reporting company” is any domestic or foreign corporation, limited liability company, or other entity created or registered to do business by the filing of a document with a secretary of state or similar office under the law of a state or American Indian tribe, including limited partnerships and trusts that are created by a filing with a secretary of state or similar office.

The CTA excludes 23 categories of entities from the definition of a reporting company, including, notably, (a) public companies; (b) any entity that (i) employs more than 20 full-time employees in the United States, (ii) filed in the previous year federal income tax returns demonstrating more than $5 million in gross receipts or sales in the aggregate, and (iii) has an operating presence at a physical office in the United States; (c) any corporation, limited liability company, or other similar entity of which the ownership interests are wholly owned or controlled, directly or indirectly, by certain exempt entities; (d) registered investment companies and advisers; (e) certain banks, bank holding companies, and credit unions; (f) 501(c) tax-exempt companies; and (g) certain inactive entities that existed on or before January 1, 2020. For a full list of the exemptions, see 31 CFR § 1010.380(c)(2).

What Information Will Reporting Companies Need to Report?

Reporting companies will be required to submit a disclosure report to FinCEN that includes (a) full legal name; (b) trade name or d/b/a; (c) current address; (d) state, tribal, or foreign jurisdiction of formation or registration; (e) IRS Taxpayer Identification Number or Employer Identification Number; and (f) the following information about each beneficial owner of the reporting company: (i) legal name, (ii) date of birth, (iii) current residential address, and (iv) an identification number (e.g., state-issued identification, driver’s license, or passport number) and image of the identifying document containing the number. Additionally, for reporting companies created or registered on or after Jan. 1, 2024, the person who submits the formation or registration documentation to the applicable state authority for the reporting company must also disclose the same information required for beneficial owners.

Note that “beneficial ownership” is defined broadly by the CTA to include any individual who, directly or indirectly, (a) owns or controls 25% or more of the ownership interests of the reporting company or (b) exercises substantial control over a reporting company. Visit the following links for additional information on the reporting requirements of reporting companies, beneficial owners, and company applicants; the definition of “beneficial owner” under the CTA; what constitutes “ownership interest”; and indicators of substantial control.

Deadlines to Report Required Information

The deadlines for reporting companies are as follows:

Duty to Update Disclosure

Reporting companies are required to report any change in information previously reported about the reporting company or its beneficial owners within 30 calendar daysof the change. This includes, for example, a change in the beneficial owners or if the reporting company becomes eligible for an exemption.

How Will Reporting Companies Make the Required Disclosures?

Reporting companies are required to submit reports containing the required information electronically through FinCEN’s Beneficial Ownership Secured System, which can be found at fincen.gov/boi.

Additional Information

Additional information regarding the CTA can be found through the following links:

• FinCEN website: fincen.gov/boi
• FinCEN FAQs: Beneficial Ownership Information Reporting | FinCEN.gov
• FinCEN Small Entity Compliance Guide: BOI Small Compliance Guide v1.1 | FinCEN.gov