Summary of Corporate Transparency Act

Background

In January 2021, Congress passed the Corporate Transparency Act (CTA) as a part of its annual National Defense Authorization Act. In an effort to combat money laundering, the financing of terrorism, and other illegal activities, the CTA sets forth requirements for many companies to disclose certain company information, including beneficial ownership information, to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).

Reporting Requirements

The CTA, which went into effect on January 1, 2024, requires most companies in the U.S. to file a report with FinCEN identifying the beneficial owners of their company, their company applicants (if the company is created or registered after January 1, 2024) and certain other company information including legal name, address, jurisdiction of formation and taxpayer identification number (TIN). Reports are filed electronically through FinCEN’s secure filing system, and FinCEN doesn’t charge a filing fee.

A beneficial owner is any individual who, directly or indirectly, either (1) exercises substantial control over a reporting company or (2) owns or controls at least 25% of the ownership interests of a reporting company.

At most, two individuals need to be reported as company applicants: first, the individual who directly files the document that creates or registers, the reporting company; and second, if more than one person is involved in the filing of the document, the individual that is primarily responsible for directing or controlling the filing of the document. In the case of a law firm facilitating a filing (whether submitting the filing directly or through a service company), FinCEN seems to consider the attorney in charge of the project to be a company applicant in addition to the individual who directly submits the filing to the state. You may refer to FinCEN’s commentary on their Final Rule regarding BOI reporting requirements and FAQs on the subject.

For each beneficial owner and company applicant, the reporting company will be required to report the individual’s (1) legal name, (2) birthdate, (3) an identifying number from a driver’s license, passport, or other approved document, and an image of such document, and (4) a current address.  If an individual chooses, they may submit these four pieces of information to FinCEN directly so that FinCEN can provide them with a “FinCEN identifier” which can then be listed on the report instead of the required information.

Due Dates

Reporting companies formed or registered before January 1, 2024, have until January 1, 2025, to file their initial reports, while reporting companies created or registered on or after January 1, 2024, and before January 1, 2025, have 90 calendar days after receiving notice of their creation or registration to file their initial reports. Reporting companies created or registered on or after January 1, 2025, will have 30 calendar days after receiving notice of their creation or registration to file their initial reports. Reporting companies have 30 days to report changes to the information in their previously filed reports and must correct inaccurate information in previously filed reports within 30 days.