The Corporate Transparency Act (CTA) goes into effect on January 1, 2024, and it will require many small businesses to report ownership information to the federal government. Wondering whether this law will affect your business? We’ve got you covered. In our Corporate Transparency Act guide, we explain what the CTA is, who it affects, and what the requirements are for business owners.
Your Corporate Transparency Act Guide
- What is the Corporate Transparency Act?
- Corporate Transparency Act Requirements
- How to File the BOI Report
- Potential Updates to the CTA
What Is the Corporate Transparency Act?
The Corporate Transparency Act is a new law requiring US corporate entities and non-US entities that do business in the United States to file a report with the federal government called the Beneficial Ownership Information (BOI) Report. The purpose of the law is to prevent bad actors from using anonymous companies to stash money for illegal purposes, such as money laundering, terrorism, and fraud.
When does the Corporate Transparency Act go into effect?
The law goes into effect January 1, 2024.
Corporate Transparency Act Requirements
Let’s go over who has to file this report, what the exemptions are, and what information is required.
Who is required to report?
Entities that are required to file the BOI Report are called “reporting companies” and include the following entities, except those that qualify for an exemption:
- US LLCs
- US corporations
- Other US corporate entities, including limited partnerships and trusts
- Foreign entities that do business in the US
Who is exempt from reporting?
There are 23 categories of BOI reporting exemptions, including:
- Large operating companies that have 20 or more full-time employees, had more than $5 million in gross receipts during the previous tax year, and have an office in the US.
- Publicly traded companies that issue securities and are regulated by the Securities Exchange Act.
- Money services businesses registered with the Department of the Treasury, such as banks, credit unions, and foreign currency exchange businesses.
- Subsidiaries of some exempt entities.
- Investment companies, investment advisers, and venture capital fund advisers that are registered with the SEC.
- Commodity pool operators and commodity trading advisors registered with the CFTC.
It’s important to note that while registered investment advisers are exempt from the reporting requirement, private investment advisers are not. Certain commodity pools and other investment vehicles are also not exempt from this requirement. If you’re not sure whether or not your business is exempt, it’s a good idea to consult an attorney.
What information do I need to report?
Reporting companies need to disclose some basic information about the business entity, as well as information about all beneficial owners of the company.
Company information required:
- Entity name (plus any DBAs)
- Business street address (no PO boxes, registered agent addresses, or mail forwarding/virtual office addresses allowed)
- Jurisdiction where the business was formed (for foreign entities, the US jurisdiction where the business is registered)
- Tax identification number, such as an EIN
Beneficial owner information required:
- Legal name
- Birth date
- Residential address
- A photo of an acceptable identification document (such as a driver’s license or passport) and the ID number from the document
When you file, you may request a FinCEN identifier, which is a number you can use on future filings with the Financial Crimes Enforcement Network (FinCEN) rather than submitting the above information again.
Note: If you form your company in 2024 or later, you’ll also need to include the name, birthdate, address, and ID of your company applicant. This is the person or persons who submitted formation or incorporation documents to your state.
Who is considered a beneficial owner?
A beneficial owner is an individual with either 25% ownership interest or substantial control over the company. The CTA criteria for having “substantial control” are deliberately vague, to account for companies with unconventional leadership structures. According to the CTA, a person is considered to have substantial control if she or he:
- Is a senior officer (such as a CEO, CFO, president, etc.).
- Has the authority to remove a senior officer or a majority or dominant minority of the board of directors.
- Directs, determines, or has substantial influence over important decisions within the company.
- Has any other form of substantial control over the company.
People who are exempt from being reported as beneficial owners include:
- Minor children. (Parent or guardian information is required instead.)
- Employees who act in the company only as employees and who are not senior officers.
- An individual acting as a nominee, intermediary, custodian, or agent for a beneficial owner.
- An individual who has only a future interest in the company through a right to inheritance.
- A creditor of the company.
Is a BOI Report public record?
No, unlike Articles of Incorporation or Articles of Organization, your BOI Report won’t go onto the public record. FinCEN will only have the authority to share information in your report with:
- US government agencies.
- State, local, and Tribal law enforcement agencies.
- Financial institutions for the purpose of verifying customer identity.
The information on the BOI report will not be accessible to the public and won’t be subject to Freedom of Information Act requests.
Will the Corporate Transparency Act affect my LLC in 2024?
It depends. If your LLC was formed prior to 2024, you won’t need to file the BOI Report until January 1, 2025. However, if you form your LLC in 2024, you’re required to file the BOI Report within 90 days of organizing your LLC with the state. Either way, it’s a good idea to prepare for this requirement as soon as possible, since you could face legal consequences if you forget to file.
How to File the BOI Report
Starting in January 2024, you can submit your BOI Report using FinCEN’s E-filing system.
Hate filing paperwork? We’ve got you covered. Our BOI Report Service can take care of your report securely for just $9.
What is the due date to submit the BOI Report?
How much time you have to submit your initial BOI Report will depend on when your company was formed:
|Company Formation Date
|BOI Report Due Date
|January 1, 2025
|Within 90 Days of Formation
|In 2025 or later
|Within 30 Days of Formation
Will the BOI Report need to be updated?
Yes. If there are any changes to the information reported, you’ll be required to file an updated report no more than 30 days after the date of the change. Some changes that would need to be reported include:
- Transfers of ownership interest.
- Changes in the names, addresses, or identifying numbers of beneficial owners.
- The company becoming exempt from reporting requirements.
What if I miss the deadline for BOI filing?
The Corporate Transparency Act states that a company that willingly fails to report or that provides false or incomplete beneficial owner information can be charged with harsh penalties—including up to a $10,000 fine and up to a two-year prison sentence. While the law says that the failure to report has to be “willing” in order to receive these penalties, it’s still a good idea to take this law seriously and file your report on time if required.
Got more questions? Check out BOI Report Frequently Asked Questions.
Potential Updates to the Corporate Transparency Act
Congress is still debating proposed changes to the Corporate Transparency Act, so the exact requirements and due dates are subject to change. For example, the House bill H.R. 5119, if signed into law, would extend the filing deadline for existing companies to January 1, 2026. The bill passed in the House of Representatives in December, 2023 but still needs to go before the Senate. At Northwest, we’re keeping an eye on these developments and will keep you updated with any changes.