The Corporate Transparency Act (CTA) is a federal law aimed at preventing money laundering that was passed in 2021. Beginning January 1, 2024, all applicable entities will have a limited timeframe to file information with a division of the U.S. Department of the Treasury called the Financial Crimes Enforcement Network (FinCEN).
Read on for a snapshot of key information to know regarding reporting requirements. Employers are strongly advised to consult their tax advisor and/or legal counsel to confirm eligibility and reporting requirements. Further details can be found on the FinCEN website.
1. Who is required to complete the federal reporting requirement for Beneficial Ownership Information (BOI)?
Companies required to report are called “reporting companies.” Your company may be a reporting company and need to report information about its beneficial owners if your company is:
A corporation, a limited liability company (LLC), or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe; or
A foreign company and was registered to do business in any U.S. state or Indian tribe by such a filing
Twenty-three types of entities are exempt from the BOI reporting requirements. These entities include publicly traded companies, nonprofits, and certain large operating companies. You can reference FinCEN’s Small Entity Compliance Guide, which includes checklists for each of the 23 exemptions that may help determine whether your company qualifies for an exemption.
2. Who is a beneficial owner of a reporting company?
A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over the reporting company, or (2) owns or controls at least 25% of the reporting company’s ownership interests.
An individual can exercise substantial control over a reporting company in four different ways. If the individual falls into any of the categories below, the individual is exercising substantial control:
The individual is a senior officer (the company’s president, chief financial officer, general counsel, chief executive office, chief operating officer, or any other officer who performs a similar function)
The individual has authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company
The individual is an important decision-maker for the reporting company
The individual has any other form of substantial control over the reporting company as explained further in FinCEN’s Small Entity Compliance Guide
An ownership interest is generally an arrangement that establishes ownership rights in the reporting company. Examples of ownership interests include shares of equity, stock, voting rights, or any other mechanism used to establish ownership.
3. What information must be reported?
In addition to BOI, reporting companies may need to report additional information, however, this depends on when the company was created or registered:
If a reporting company is created or registered on or after January 1, 2024, the reporting company will need to report information about itself, its beneficial owners, and its company applicants
If a reporting company was created or registered before January 1, 2024, the reporting company only needs to provide information about itself and its beneficial owners. The reporting company does not need to provide information about its company applicants
4. How do applicable companies file their report?
Reporting companies will have to report beneficial ownership information electronically through FinCEN’s website: www.fincen.gov/boi
5. When is the deadline to file?
Reports will be accepted starting on January 1, 2024:
If your company was created or registered prior to January 1, 2024, you will have until January 1, 2025 to report BOI
If your company is created or registered on or after January 1, 2024, you must report BOI within 30 days of notice of creation or registration