What is the Corporate Transparency Act?

The Corporate Transparency Act (CTA) requires many corporations, limited liability companies, and other entities operating in the United States to report their beneficial ownership information. Failure to comply can result in severe civil and criminal penalties.

Covered Entities (Reporting Companies) That Must File

The CTA requires the following entities to report their beneficial owners to FinCEN:

C-Corporations
S-Corporations
Limited Liability Companies (LLCs)
Limited Partnerships (LPs)
Limited Liability Partnerships (LLPs)
Business Trusts Created by Filing
Any Other Entity Created by Filing a Document with Secretary of State or Similar Office
Foreign Registered Entities
Non-U.S. entities registered to do business in the United States, such as through a state authority, are considered a “reporting company” covered by the BOI disclosure rules.

Exempt Entities

The following entities are exempt from the CTA’s beneficial ownership reporting requirements and do not need to file:

Securities reporting issuers
Governmental authorities
Banks
Credit unions
Depository institution holding companies
Money services businesses
Brokers or dealers in securities
Securities exchanges or clearing agencies
Other Exchange Act-registered entities
Investment companies or investment advisers
Venture capital fund advisers
Insurance companies
State-licensed insurance producers
Commodity Exchange Act-registered entities
Accounting firms
Public utilities
Financial market utilities
Pooled investment vehicles
Tax-exempt entities
Entities assisting tax-exempt entities
Large operating companies (Companies with over 20 employees and annual gross receipts exceeding $5 million)
Subsidiaries of certain exempt entities
Inactive companies

What must be reported?

The following information must be reported to FinCEN by covered entities and beneficial owners:

Full legal name
Any trade name or “doing business as” (DBA) name
Report all trade names or DBAs.
Complete current U.S. address
Report the address of the principal place of business in United States, or, if the reporting company’s principal place of business is not in the United States, the primary location in the United States where the company conducts business.
State, Tribal, or foreign jurisdiction of formation
For a foreign reporting company only, State or Tribal jurisdiction of first registration
Internal Revenue Service (IRS) Taxpayer Identification Number (TIN) (including an Employer Identification Number (EIN))
If a foreign reporting company has not been issued a TIN, report a tax identification number issued by a foreign jurisdiction and the name of such jurisdiction.

Beneficial Owners

Beneficial owners are individuals who meet certain criteria, including:

Exercise substantial control over the entity
Own or control at least 25% of the entity’s ownership interests

Reporting Requirements for Beneficial Owners include:

Full legal name
Date of birth
Complete current address

Report the individual’s residential street address, except for company applicants who form or register a company in the course of their business, such as paralegals. For such individuals, report the business street address. The address is not required to be in the United States.

Unique identifying number and issuing jurisdiction from, and image of, one of the following non-expired documents:

U.S. passport
State driver’s license
Identification document issued by a state, local government, or tribe
If an individual does not have any of the previous documents, foreign passport

Company Applicants

A company applicant is an individual who plays a key role in the formation or registration of a reporting company, including:

Files a document that creates or first registers the company
Directs or controls the filing action

Each reporting company must identify and report at least one company applicant, and at most two.

When do Companies Need to Report?

A reporting company must report its company applicants if it is:

A domestic reporting company created on or after January 1, 2024
A foreign reporting company first registered to do business in the United States on or after January 1, 2024

Reporting Requirements for Company Applicants include:

Full legal name
Date of birth
Complete current address

Report the individual’s residential street address, except for company applicants who form or register a company in the course of their business, such as paralegals. For such individuals, report the business street address. The address is not required to be in the United States.

Unique identifying number and issuing jurisdiction from, and image of, one of the following non-expired documents:
U.S. passport
State driver’s license
Identification document issued by a state, local government, or tribe
If an individual does not have any of the previous documents, foreign passport

When updates are required

The CTA requires companies to update their previously filed beneficial ownership information within 30 calendar days if certain events occur:

Changes in Ownership/Control
Reporting companies must provide an updated BOI report if there is a change in:

Any particular listed that resulted in an existing person being a beneficial owner
Any particular listed that resulted in an existing beneficial owner no longer being considered one
This includes situations where an existing beneficial owner’s reported information changes (e.g. name change, new address) or when new individuals acquire or divest beneficial ownership interests.

The rules also require an update within 30 days after the expiration date of any identification document that was previously submitted for a beneficial owner, such as:

Driver’s licenses
Passports
Other credential used to report a unique identifying number

Companies must obtain and report the new unexpired document information from the beneficial owner.

Penalties for Non-Compliance

Failing to comply with the CTA beneficial ownership disclosure mandates can trigger substantial financial penalties, potential prison time of up to 2 years for willful violations, and other severe civil and criminal consequences – even asset seizure in egregious cases.

NCS BOI Filing: Your Trusted Solution for Seamless CTA Compliance

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Source: https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf