Corporate Transparency Act imposes a duty for companies to report their beneficial owners

The Corporate Transparency Act (CTA) was enacted in 2021 to combat illicit finance. A key piece is the duty to report the beneficial owners of companies doing business in the US, which kicks off in 2025. Since this will impact a large number of startups and small businesses, here’s a concise summary of its key points:

Purpose: The CTA aims to enhance transparency by requiring certain business entities (referred to as “reporting companies”) to disclose information about their “beneficial owners.” A beneficial owner is an individual who directly or indirectly owns 25% or more of a reporting company or is a senior officer (C-suite, board members or anyone with similar authorities).

Who must report: All companies doing business in the US, although there are many exemptions, most of which involve businesses already under some regulatory scrutiny, such as banks, public utilities, SEC-filers, etc. Perhaps the most widely applicable exemption is the “large operating company”, which exempts companies that meet all three of the following: (a) have 20 or more full-time employees in the US (b) have an operating presence in the US, and (c) have gross sales or receipts of more than $5,000,000 reported in its Federal income tax filings.

When to report: Existing Companies: Reporting companies that were created or registered to do business in the United States before January 1, 2024, must file their initial reports by March 21, 2025.

What to Report: Reporting companies must provide information about each beneficial owner, including their name, date of birth, address, and identifying number (from specific documents like a U.S. driver’s license or passport). An image of the document must also be submitted. Exempted companies do not have to make any filing.

How to Report: by filing at https://boiefiling.fincen.gov/

New Companies: Reporting companies formed in 2024 have 90 calendar days to file after receiving notice that their creation or registration is effective.

Company Applicants: Companies created on or after January 1, 2024, must also report information about the individuals who formed the company.

Penalties: Delayed reporting can be fined by up to $591 per day, in addition to civil penalties of up to $10,000 and two years of imprisonment.

If you have any questions or need help with complying with this, feel free to reach out!