Beneficial Ownership Reporting

The Corporate Transparency Act (CTA), enacted as part of the National Defense Authorization Act for Fiscal Year 2021, requires millions of entities to report their Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Department of the Treasury.

The CTA aims to prevent money laundering and other crimes by creating transparency around company ownership and control.

Reporting Company

The CTA requires a reporting company to disclose information about beneficial owners to the FinCEN. All domestic and foreign entities that have filed formation or registration documents with a U.S. state (or Indian tribe) are required to report, unless they meet one of the exceptions.

Domestic reporting company.

A domestic reporting company is a corporation, limited liability company (LLC), or other entity created under the laws of a U.S. state or Indian tribe by the filing of a document with a secretary of state or similar office.

Foreign reporting company.

A foreign reporting company is a corporation, LLC, or other entity formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by filing a document with a secretary of state or similar office.

Exemption entities

23 types of entities are exempt from the beneficial ownership reporting requirement. Many of these entities are already regulated by federal or state government and many already disclose ownership information to a government authority. One of the exemptions, for example, is for large operating companies with at least 20 full-time employees, more than $5,000,000 in gross receipts or sales, and a substantial physical presence at a business location in the United States.

FinCEN’s Small Entity Compliance Guide includes checklists for each of the 23 exemptions that may help determine whether your company qualifies for an exemption. To access the guide go to https://www.fincen.gov/boi/small-entity-compliance-guide.

Small businesses. Note that small businesses are not exempt. Also, there is no dollar minimum or profit motive requirement. A hobby that generates no profits, for example, would be subject to reporting requirements if it is registered as a limited liability company.

Beneficial Owner

A beneficial owner includes any individual who, directly or indirectly, either:

• Exercises substantial control over a reporting company, or
• Owns or controls at least 25 percent of the ownership interests of a reporting company.

The regulation further defines persons who have substantial control or own or control ownership interests.

Information Reported

Reporting companies must report the identity of the company:

• Full legal name of the reporting company,
• Any alternate trade or DBA (Doing Business As) names and tradenames,
• Current address of its principal place of business,
• State or Tribal jurisdiction of formation or registration,
• Its IRS taxpayer identification number.

Additionally, each reporting company must report the following details about its beneficial owners and, for newly created entities, its company applicant(s):

• The individual’s full legal name, birthdate, and residential address,
• A unique identifying number and issuing jurisdiction from an acceptable identification document (e.g., passport or driver’s license) and
• An image of the identifying document.

The required information for an individual can either be reported by the company or the individual. If an individual provides the information, he or she may obtain a “FinCEN identifier,” which can then be used by the reporting company in lieu of the individual’s required information.

Company Applicant

Reporting companies created after January 1, 2024 must also report information about the company applicants. The company applicant includes any individual who directly files the formation or registration document or is primarily responsible for directing or controlling the filing process.

Reporting Timeline

Reporting begins January 1, 2024.

• Reporting companies created or registered before January 1, 2024, have one year (until January 1, 2025) to file their initial reports.
• Reporting Companies created or registered on or after January 1, 2024, but before January 1, 2025, have 90 days after formation or registration to file their initial reports.
• Reporting Companies created or registered on or after January 1, 2025, have 30 days after formation or registration to file their initial reports.
• Reporting Companies have 30 days to report changes to the information in previous reports and 30 days to correct inaccurate information after becoming aware of the errors or having reason to know of the inaccuracies.

How to report

Beneficial ownership information is reported electronically via FinCEN’s website: **www.fincen.gov/boi.**

There is no fee to file.

Use of information

The CTA imposes stringent access requirements and safeguards on users. Foreign and domestic security, intelligence, and law enforcement agencies will be able to access beneficial ownership information. Financial institutions conducting customer due diligence will also be able to access this information upon customer consent.

Penalties for non-compliance

Civil Penalties: Up to $591 per day for violations as of 2024, adjusted annually for inflation.

Criminal Penalties: Fines of up to $10,000 and/or up to two years of imprisonment.