The Corporate Transparency Act (CTA) represents a significant shift in regulatory requirements for small businesses in the United States. Implemented to combat illegal activities such as tax fraud, money laundering and terrorism financing, The Corporate Transparency Act requires companies to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). The purpose of this is to increase transparency to law enforcement agencies, regulatory bodies and financial institutions, making it harder for criminals to hide their identities behind anonymous entities or shell companies.
Is this relevant to my Small Business?
Yes, unless your company is deemed to be exempt, you need to file your Beneficial Ownership Information Report (BOIR) to FinCEN within the required timeframe! It is critical to understand and comply with these requirements to avoid facing penalties.
Entity Formation | Filing Deadlines
If your company was registered before January 1, 2024 | January 1 2025
If your company was registered on or after January 1 2024 and before January 1 2025 | 90 calendar days after receiving notice of your companies creation
If your company was created on or after January 1 2025 | 30 calendar days from actual or public notice that the company's registration is effective.
How do I know if I am exempt from being considered a reporting company?
A reporting company is defined as a corporation, LLC, or other entity created by filing a document with a Secretary of State or similar office, or an entity formed under the law of a foreign country and registered to do business by filing a document with a Secretary of State or similar office. However, 23 types of entities are exempt from being considered a reporting company. These generally include publicly traded companies meeting specified requirements, many nonprofits, and certain large operating companies.
1. Securities reporting issuer
2. Governmental authority
3. Bank
4. Credit Union
5. Depository institution holding company
6. Money services business
7. Broker or dealer in securities
8. Securities exchange or clearing agency
9. Other Exchange Act registered entity
10. Investment company or investment adviser
11. Venture capital fund adviser
12. Insurance company
13. State licensed insurance producer
14. Commodity Exchange Act registered entity
15. Accounting firm
16. Public utility
17. Financial market utility
18. Pooled investment vehicle
19. Tax-exempt entity
20. Entity assisting a tax-exempt entity
21. Large operating company
22. Subsidiary of certain exempt entities
23. Inactive entity
Who is considered a beneficial owner?
There are two primary criteria to determining whether or not you are a beneficial owner. First, anyone who owns or controls at least 25% of a company’s ownership interest is considered to be a beneficial owner. Secondly, individuals who exercise substantial control over a business, regardless of their direct ownership stake, also fall into this category. Understanding who qualifies as a beneficial owner takes on heighten importance as these regulations mandate thorough disclosure of individuals who exert significant control or ownership over a company.
What information do I need to disclose to FinCEN?
As a reporting company, you must report the following information about the reporting company:
- Legal name
- Any trade, doing business as (DBA), or trading as names
- The current street address of its U.S. place of business, jurisdiction of formation or registration
- Your company’s jurisdiction of formation or registration
- Taxpayer Identification Number. If a foreign reporting company has not been issued a TIN, a taxpayer identification number issued by a foreign jurisdiction and the name of the jurisdiction will suffice.
- Type of BOI filing (i.e. initial report, a correction of a prior report, or an update to a prior report)
As a reporting company, you must report the following information about your beneficial owners:
- Individual’s name
- Date of birth
- Residential address
- Identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of the identification document. The reporting company will also have to report an image of the identification document used to obtain the identifying number.
As a reporting company, you must report the following information about your applicants:
- Individual’s name
- Date of birth
- Residential address
- Identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of identification document. The reporting company will also have to report an image of the identification document used to obtain the identifying number.
How will I hear about BOI requirements?
FinCEN has launched an extensive outreach and educational initiative aimed at familiarizing reporting entities with the new reporting obligations. FinCEN is actively collaborating with governmental offices at both the federal and state levels, as well as small business associations and interest groups to get the word out. To stay informed about BOI reporting requirements, FinCEN will continue to provide guidance, information, and updates on its dedicated BOI website at www.fincen.gov/boi
