The Corporate Transparency Act &
Beneficial Ownership Information Reporting
by Tracy Cope & Carter Tax Department
February 20, 2024
The Corporate Transparency Act (CTA), enacted in 2021 as an anti-money laundering measure, requires most small businesses in the U.S. to report information about the individuals who ultimately own or control them. This act became effective January 1, 2024 and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) is now accepting beneficial ownership information (BOI) reports on their website.
The CTA requires a “Reporting Company” to file a beneficial ownership information (BOI) report with specific information about the entity and it’s “beneficial owners.” Also, companies created on or after January 1, 2024 will need to report company applicants.
Carter PC will not be assisting with compliance with the Corporate Transparency Act (CTA), including beneficial ownership information (BOI) reporting. You have the sole responsibility for your compliance with the CTA, including its BOI reporting requirements and the collection of relevant ownership information. We shall have no liability resulting from your failure to comply with CTA. Consider consulting with legal counsel if you have questions regarding the applicability of the CTA’s reporting requirements and issues surrounding the collection of relevant information. The information below is for informational purposes only and does not, and is not intended to, constitute advice.
What is a Reporting Company?
A “Reporting Company” is a corporation, limited liability company (LLC), or any other type of company that is created through a filing with a Secretary of State (SOS) or equivalent official. Also, a foreign company that is registered to do business in the U.S. may be a “Reporting Company.” There are 23 exemptions from the reporting requirements. However, these exemptions primarily fall into a few categories, such as:
- Large operating companies;
- Tax-exempt organizations; and
- Organizations that are required to register with the federal government in a highly-regulated manner.
Please review the FinCEN Small Entity Compliance Guide for detailed information and charts regarding “reporting companies” as well as a detailed list of the 23 exemptions.
Who is a Beneficial Owner?
A beneficial owner is any individual who, directly or indirectly:
- Exercises substantial control over a reporting company; OR
- Owns or controls at least 25% of the ownership interests of a reporting company.
Please review the FinCEN Small Entity Compliance Guide for detailed information and charts regarding beneficial owners and defines what is substantial control and ownership interest.
What is a Company Applicant?
A reporting company is required to report its company applicants if it is either a:
- Domestic reporting company created on or after January 1, 2024; or
- Foreign reporting company first registered to do business in the United States on or after January 1, 2024.
Please review the FinCEN Small Entity Compliance Guide for detailed information.
What information is required?
The company must submit the following about the reporting company:
- Full legal name
- Any trade name or “doing business as” (DBA) name
- Current U.S. address
- State, Tribal, or foreign jurisdiction of formation
- IRS Employer Identification Number (EIN)
The company must provide the following about each beneficial owner and company applicant:
- Full legal name
- Date of birth
- Current address
- Unique identifying number and issuer from either a non-expired U.S. driver’s license, a non-expired U.S. passport, or a non-expired identification document issued by a State (including a U.S. territory or possession), local government, or Indian tribe. If none of those documents exist, a non-expired foreign passport can be used. An image of the document must also be submitted.
Please review the FinCEN Small Entity Compliance Guide for detailed information.
When is the report due?
Initial Reports for Existing Companies:
- Due by January 1, 2025 for companies created or registered to do business in the U.S. before January 1, 2024.
Initial Reports for New Reporting Companies:
- Due 90 calendar days after receiving actual or public notice that the company’s creation or registration is effective, for companies created or registered on or after January 1, 2024 and before January 1, 2025.
- Due 30 calendar days after receiving actual or public notice that the company’s creation or registration is effective, for companies created or registered on or after January 1, 2025.
Updated Reports:
- Due 30 calendar days after any change to the required information about your company or its beneficial owners.
Please review the FinCEN Small Entity Compliance Guide for detailed information.
What are the penalties for noncompliance?
There are civil and criminal penalties for noncompliance. The willful failure to report complete or updated BOI, or reporting of false or fraudulent information to FinCEN may result in civil penalties of up to $500 per day for each day that the violation continues. Also, failing to comply or providing false or fraudulent information may subject violators to criminal penalties of up to 2 years in prison or $10,000 in fines.