New Legislation: The Corporate Transparency Act

The Corporate Transparency Act, which went into effect on January 1, 2024, requires certain businesses to report beneficial ownership information to the federal government.

Enacted in 2021, the CTA was established to prevent individuals with malicious intent from hiding or benefitting from the ownership of their U.S. entities to facilitate illegal operations which, according to Congress, is a widely-used tactic that affects national security and economic integrity.

Businesses that meet certain criteria must submit a Beneficial Ownership Information (BOI) Report to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), providing details about individuals who are associated with the reporting company.

Who is a beneficial owner of a company?

A beneficial owner of an entity is an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise (i) exercises substantial control over the entity; or (ii) owns or controls not less than 25% of the ownership interests of the entity.  

Which businesses must report, and when?

Two types of companies are required to submit BOI reports: domestic companies, including LLCs, corporations, and other entities formed through filing with a secretary of state or comparable office in the U.S.; and foreign companies that are registered to conduct business in the U.S. through filing with a secretary of state or equivalent office.

Reporting companies must timely file their initial BOI reports.

• For companies established before January 1, 2024, the filing deadline is January 1, 2025. 
• Those created between January 1, 2024, and January 1, 2025, will have 90 days from either the actual notice of formation or public announcement, whichever comes first, to file. 
• Businesses established on or after January 1, 2025, will have 30 days from notification or public announcement of their formation, to file.

What information must be reported?

Required information varies based on when the business was established.

• Businesses established post-January 1, 2024, must provide the following information for each beneficial owner and each applicant  (“beneficial ownership information”): full legal name; date of birth; current residential or business street address; and a unique identifying number from an acceptable identification document (passport, driver’s license or other government issued identification document) or a FinCEN identifier. 
• Businesses established before January 1, 2024, can omit information regarding applicants.

NOTE: An applicant is “any individual who (A) files an application to form a corporation, limited liability company, or other similar entity under the laws of a State or Indian Tribe or (B) registers or files an application to register a corporation, limited liability company, or other similar entity ...”

Where can I learn more?

For more information, please visit: https://www.fincen.gov/boi.