What is the Corporate Transparency Act?
As you may know, The Corporate Transparency Act (CTA) was passed into law on January 1, 2021, and will go into effect on January 1, 2024. Once this goes into effect, every “reporting company” must file a report with the Financial Crimes Enforcement Network (FinCEN).
FAQs for The Corporate Transparency Act
We have gathered a few Frequently Asked Questions that we hope to address your concerns. Please contact us if you have any questions.
How is a “Reporting Company” defined?
A “reporting company” is defined as a corporation, LLC, or other entity created by the filing of a document with a Secretary of State or similar office or formed under the law of a foreign country and registered to do business by the filing of a document with a Secretary of State or similar office. (See 31 CFR 1010.380(C)(1)).
However, a corporation, LLC, or other entity will not be considered a reporting company and therefore not required to file a report if it qualifies for one of the 23 exemptions set forth in the Corporate Transparency Act and the final rule implementing the reporting requirement. (See 31 CFR 1010.380(C)(2)).
Does my company have to report its beneficial owners?
While certain types of entities are exempt (see below question), if you are a small corporation or LLC, you will likely be required to report your beneficial ownership information to FinCEN. A key factor in determining whether your company will have to report is whether you had to file a document with your state’s secretary of state or a similar office to create your company or, for foreign companies, register it to do business in the United States.
Who is the beneficial owner of my company?
A beneficial owner is any individual who exercises substantial control over your company, or who owns or controls at least 25 percent of your company.
Does my company have to report its company applicants?
There can be up to two individuals who qualify as company applicants — (1) the individual who directly files the document that creates, or first registers, the reporting company; and (2) the individual that is primarily responsible for directing or controlling the filing of the relevant document.
Your company is only required to report its company applicants if it is created or registered on or after January 1, 2024
What specific information does my company need to report?
A reporting company will need to provide: (1) its legal name and any trade name or DBA; (2) its address; (3) the jurisdiction in which it was formed or first registered, depending on whether it’s a U.S. or foreign company; and (4) its Taxpayer Identification Number (TIN).
For each of your company’s beneficial owners and each company applicant (if required), your company will need to provide the individual’s: (1) legal name; (2) birthdate; (3) address (in most cases, a home address); and (4) an identifying number from a driver’s license, passport, or other approved document for each individual, as well as an image of the document that the number is from.
When and how should my company file its initial report?
If your company is created or registered before January 1, 2024, file by January 1, 2025. Otherwise, file within 30 calendar days of receiving actual or public notice from your state’s secretary of state or similar office that your company was created or registered. FinCEN will accept reports electronically beginning January 1, 2024.
What if there are changes to or inaccuracies in reported information?
Your company will have 30 days to report any changes to reported information. For updates, the 30 days start from when the relevant change occurs. For corrections, the 30 days start after you become aware of, or have reason to know of, an inaccuracy in a prior report.
Are there exemptions from the reporting requirement?
Yes. The Corporate Transparency Act exempts 23 types of entities from the beneficial ownership information reporting requirement. Below is a list of the types of entities that are exempt:
- Certain types of securities reporting issuers.
- A U.S. governmental authority.
- Certain types of banks.
- Federal or state credit unions as defined in section 101 of the Federal Credit Union Act.
- Bank holding company as defined in section 2 of the Bank Holding Company Act of 1956, or any savings and loan holding company as defined in section 10(a) of the Home Owners’ Loan Act.
- Certain types of money transmitting or money services businesses.
- Any broker or dealer, as defined in section 3 of the Securities Exchange Act of 1934, that is registered under section 15 of that Act (15 U.S.C. 78o).
- Securities exchanges or clearing agencies as defined in section 3 of the Securities Exchange Act of 1934, and that is registered under sections 6 or 17A of that Act.
- Certain other types of entities registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934.
- Certain types of investment companies as defined in section 3 of the Investment Company Act of 1940, or investment advisers as defined in section 202 of the Investment Advisers Act of 1940.
- Certain types of venture capital fund advisers.
- Insurance companies defined in section 2 of the Investment Company Act of 1940.
- State-licensed insurance producers with an operating presence at a physical office within the United States, and authorized by a State, and subject to supervision by a State’s insurance commissioner or a similar official or agency.
- Commodity Exchange Act registered entities.
- Any public accounting firm registered in accordance with section 102 of the Sarbanes-Oxley Act of 2002.
- Certain types of regulated public utilities.
- Any financial market utility designated by the Financial Stability Oversight Council under section 804 of the Payment, Clearing, and Settlement Supervision Act of 2010.
- Certain pooled investment vehicles.
- Certain types of tax-exempt entities.
- Entities assisting a tax-exempt entity described in (xix) above.
- Large operating companies with more than 20 full-time employees, more than $5,000,000 in gross receipts or sales, and an operating presence at a physical office within the United States.
- The subsidiaries of certain exempt entities.
- Certain types of inactive entities that were in existence on or before January 1, 2020, the date the Corporate Transparency Act was enacted.
Many of these exempt entities are already regulated by federal and/or state government, and many already disclose their beneficial ownership information to a governmental authority.
Additional information about the entities that are exempt can be found in the Beneficial Ownership Information Reporting Regulations at 31 CFR § 1010.380(c)(2). You should consult the text of the regulations, which include specific criteria for the exemptions, before concluding that an entity qualifies for an exemption.
Helpful Links and Resources
Below, you will find links to helpful information regarding the requirements, exemptions, and FinCEN updates.
- Additional information about the entities that are exempt:
- Beneficial Ownership Information Reporting Regulations at 31 CFR 1010.380(c)(2).
- Beneficial Owner Reporting Requirements
- FinCEN Beneficial Owner Fact Sheet
- FinCEN Frequently Asked Questions Publication
- Sign up for FinCEN direct updates
Not sure what you need to do with the CTA? No Problem.
Our experienced teams have decades of experience to help guide you through the maze of understanding and being prepared for the CTA, effective January 1, 2024. Talk to us about your questions or concerns, and we will do our best to help. Sign up for updates on the blog to stay informed as the effective date draws near.
Please note: This content is provided for informational purposes only and should not be considered or relied upon as legal advice.
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