FAQ: The Corporate Transparency Act and Beneficial Owner Information Reporting Requirements

DISCLAIMER: This summary is intended as general information for our clients and associates and should not be regarded as legal advice.

Effective January 1, 2024, the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) enacted new mandatory reporting requirements for “reporting companies”. The Corporate Transparency Act (“CTA”) was enacted by Congress on January 1, 2021, and is intended to help prevent and combat money laundering, terrorist financing, corruption, and tax fraud. Under the CTA, reporting companies are required to disclose information regarding their “beneficial owners” and certain other information to FinCEN through Beneficial Ownership Information (BOI) reports.

Which companies are required to report?

All reporting companies must report. Unless an exemption exists, this includes virtually any corporation, LLC, and other entity formed by an organizational filing with a secretary of state’s office in the United States. Although the CTA is geared toward active companies, in certain circumstances an inactive company may be required to report.

Exemptions exist for certain companies that are already subject to regulatory disclosure, such as banks, insurance companies, public accounting firms and SEC-reporting companies. Notably, an exemption also exists for an entity that (i) filed U.S. Federal income tax returns in the previous year demonstrating more than $5 million in gross receipts or sales, (ii) operates and has a presence at a physical office within the United States, and (iii) employs more than 20 full-time employees in the United States. Please see the list of exempt entities linked here.

Who is considered a beneficial owner for reporting purposes?

The definition of “beneficial owner” largely mirrors definitions in similar regulatory disclosure regimes. A beneficial owner is an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise (i) owns or controls at least 25% of the equity interests of the entity, or (ii) exercises substantial control over the entity.

“Substantial control” is broadly defined. It encompasses individuals who (i) serve as a senior officer of the reporting company, (ii) have appointment or removal authority over the senior officers and board of directors, (iii) can direct, determine, or have substantial influence over important decisions within the company, or (iv) have any other type of substantial control over the company.

When do I report?

• If your company was created or registered prior to January 1, 2024, you have until January 1, 2025 to report.
• Companies created in 2024 must report within 90 days after inception. Companies created after 2024 must report within 30 days after inception.
• Failure to report is punishable with a civil penalty of up to $500 per day. In extraordinary circumstances, violators are subject to criminal penalties of imprisonment of up to two years and fines of up to $10,000.

What is Reported?

• Company legal name and current principal place of business street address in the U.S.
• Any assumed business name (DBA) used by the company.
• Company taxpayer identification number (TIN or EIN).
• Each beneficial owner’s name, birthdate and residential street address. Also required is an identifying number with an image of an acceptable ID (e.g., non-expired driver’s license or passport).
• For businesses created on or after January 1, 2024, the individual (the “company applicant”) who files the initial company organizational document as well as (if different) the individual that directs or controls such filing will be required to provide the same information as a beneficial owner (see preceding bullet point).
• This is not an annual report. Subsequent filings are required only to correct errors or reflect changes in disclosed information. FinCEN does not charge a filing fee.

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Portions of the summary above have been copied from the Oregon Secretary of State website

For the most up-to-date information please visit the FinCEN website at: https://www.fincen.gov/boi

For additional details and information, please visit the FinCEN BOI Reporting FAQs at: https://www.fincen.gov/boi-faqs