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Business Alert: The Corporate Transparency Act and Beneficial Ownership Reporting

Starting January 1, 2024, the majority of legal entities functioning in the United States need to assess whether they should submit reports on beneficial ownership information to the Financial Crimes Enforcement Network, in accordance with the Corporate Transparency Act (“CTA”).

The CTA represents a significant development in the realm of corporate compliance and transparency. Its primary objective is to enhance transparency in beneficial ownership of certain entities. The CTA aims to prevent illicit activities such as money laundering, terrorism financing, and other financial crimes by requiring reporting companies to disclose accurate and up-to-date information about their beneficial ownership structure – the humans behind the companies – to the Financial Crimes Enforcement Network (FinCEN).

The CTA will affect virtually all small businesses, including LLCs and entities designed only to hold real estate. Even an entity with only one owner, which is ignored for federal income tax purposes (such as a single-member LLC) will still have to file reports with FinCEN.

  • For any non-exempt entity that exists before January 1, 2024, the initial report is due by January 1, 2025.
  • For any non-exempt entity created on or between January 1, 2024 – January 1, 2025, the initial report is due within 90 days from the creation of the entity.
  • If you create and/or register any entity after January 1, 2025, you will only have 30 days to file your initial report.

As of now, there are no extensions available. 

There are stiff civil and criminal penalties for failing to file. 

If you have any interest in a closely held entity, such as an LLC, corporation, or limited partnership, or if you exert significant control over any such entity, you should consult an attorney as you may be subject to the requirements.

The following is a high-level overview of key provisions of the CTA.

Reporting Companies. A Reporting Company, unless falling under “Exempt Companies,” refers to (a) any entity created by filing documentation with the Secretary of State or similar office in any state, U.S. territory, or federally recognized Indian Tribe, or (b) a foreign-formed entity registered to conduct business in any state, U.S. territory or federally recognized Indian Tribe to do business in the U.S.

Exempt Companies. 23 types of entities are exempt from the reporting requirements, primarily encompassing regulated entities already mandated to disclose beneficial ownership information to regulators. These exempt entities include: Securities Issuers; Domestic Governmental Authorities; Banks; Domestic Credit Unions; Bank Holding Companies and Savings and Loan Holding Companies; Registered Money Transmitting Businesses; Broker-Dealers; Securities Exchange or Clearing Agents; Other Exchange Act Registered Entities; Registered Investment Companies and Advisers; Venture Capital Fund Adviser; State-Regulated Insurance Companies; State-Licensed Insurance Producers; Commodity Exchange Act Registered Entities; Public Accounting Firms; Public Utilities; Financial Market Utilities; Pooled Investment Vehicles; Tax Exempt Entities; Entities Assisting Tax Exempt Entities; Large Operating Companies; Subsidiaries of Exempt Entities; and Inactive Entities.

To qualify for the Large Operating Company exemption, the entity must have:

  • 20 or more full-time employees in the U.S.;
  • an operating presence at a physical office in the U.S. (not including a residence or shared space, except spaces shared with affiliates); and
  • have filed a tax return in the previous year showing more than $5 million in U.S.-sourced gross receipts or sales. (Newly formed entities will not qualify for this exemption because they will not have filed a federal tax return in the previous year).

Whether an entity qualifies for an exemption will be an ongoing determination. If an entity ceases to meet the criteria for an exemption, it will become a Reporting Company and will need to promptly file a report.

Beneficial Owner. A Beneficial Owner is any individual that, directly or indirectly, either:

  • owns or controls at least 25% of the total ownership interests of the Reporting Company, calculated as they stand at the time of the calculation and on a fully diluted basis, or
  • exercises Substantial Control over the Reporting Company.

Substantial Control. This term is broadly defined by the CTA and FinCEN. Individuals in positions such as board members, managers and members of an LLC, general partners of a limited partnership, executive officers, or anyone with similar influence or control over important matters concerning the entity’s operations, business, or finances will be deemed to have “Substantial Control.” Many different types of contractual, and even informal, arrangements may confer “Substantial Control,” including but not limited to a person having the right to elect or cause the removal of a director or officer, a person having control over another person who is a director or officer, a person having approval rights over major decisions, and a person having control over an intermediary entity that give that person effect control over a Reporting Company. All such individuals will be considered Beneficial Owners, necessitating report filings under the CTA.

Additionally, ownership instruments like convertible debt, options, rights to purchase or subscribe for equity, etc., will contribute to the 25% ownership threshold for reporting purposes and may also be considered to convey “Substantial Control”, thus making the holder of the instrument a Beneficial Owner.

There is no limit on the number of Beneficial Owners a Reporting Company might have.

Information a Reporting Company is required to submit to FinCEN. A Reporting Company will be required to report the Reporting Company’s legal name, any trade names, the current street address of its principal place of business, its jurisdiction of formation or registration, and its tax identification number.

The Reporting Company will also be required to report the name, birthdate, and address for each of the Reporting Company’s Beneficial Owners. It will also need to provide the Government issued identification number (i.e. U.S. Passport number, or current driver’s license), along with a copy of the applicable Government Issued ID document for each Beneficial Owner.

If the Beneficial Owner or the Company Applicant has applied for and received a FinCEN Identifier, that is sufficient to report to the Reporting Company in lieu of the above items.

Updating Reports. If the information in a report becomes outdated or there are inaccuracies, the Reporting Company must file an amended report within 30 days following the event causing the report to be outdated. Some examples that will require updated reports include: name changes for a Beneficial Owner; a change in address for the Reporting Company or for a Beneficial Owner; the expiration of the Government issued ID document of a Beneficial Owner; and death of a Beneficial Owner.

Note: If a Reporting Company files a report and later is entitled to an exemption from filing, it must file an amendment claiming the exemption. 

Penalties. The CTA provides for both civil and criminal penalties (up to $10,000 per incident and two years of imprisonment) for willfully providing false information, failing to provide complete information, or failing to update information.

An individual may be held liable under the CTA if they caused the failure or were a senior officer at the time of the failure.


The materials listed below are now available on FinCEN’s beneficial ownership information reporting webpage:

Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the firm’s scope and terms of representation. Clients will remain responsible for filing any required reports with FinCEN, either directly or through a third-party vendor. 



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