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In January 2021, Congress enacted the Corporate Transparency Act (CTA) in order to protect the United States financial system from being used for money laundering and/or other illicit activities. Oftentimes when these illegal activities are occurring, the perpetrators are not using their own names to conduct the schemes, but rather use the shield of a corporation or an LLC. Because law enforcement had difficulty uncovering these individuals, Congress enacted CTA to attempt to prevent these illegal activities.

The Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a final rule implementing the beneficial ownership (BOI) reporting requirements on September 21, 2022. The effective date of this requirement is January 1, 2024. Below I have listed out general information regarding the new requirements for entities created and conduct business in the United States. Although many similar rules and requirements, this article does not address foreign reporting companies.

Reporting Company

A domestic reporting company is defined as a corporation, a limited liability company, or another entity that was created by the filing of a document with the Secretary of State.

Exempt Companies

There are a series of exemptions for entities who do not have to file under the CTA. Primarily, these entities are already subject to state or Federal reporting requirements. These entities include, but are not limited to, the SEC, governmental authorities, banks, credit unions, money service businesses, investment advisors, security brokers and dealers, tax exempt entities, entities assisting tax exempt entities, insurance companies, state-licensed insurance producers, pooled investment vehicles, public utilities, inactive entities, subsidiaries of certain exempt entities, accounting firms, and large operating companies.

A large operating company is any entity that (1) employs more than twenty (20) full time employees in the United States, (2) has an operating presence at a physical office within the United States, and (3) has filed a federal income tax or information return in the United States for the previous year demonstrating more than $5 million in gross receipts or sales on the entity’s IRS Form 1120 or other applicable IRS form, excluding gross receipts or sales from sources outside of the United States.

Initial BOI Report Filing Timing

Any domestic reporting company created before January 1, 2024 must file a report before January 1, 2025.

Any domestic reporting company created on or after January 1, 2024, is required to file a report within thirty (30) calendar days of either notice that it was approved through the Secretary of State.

Information Required in the Report

All domestic reporting companies will be required to file information about the reporting company.

The information required about the reporting company is:

1. Full legal name of reporting company;
2. Any trade name or “doing business as” (“d/b/a”) name;
3. Complete address of the principle place of business;
4. The state of formation; and
5. The IRS Taxpayer Identification Number (TIN) (including an Employer Identification Number (EIN)).

A domestic reporting company will also be required to provide information about each of the individuals who are the company’s beneficial owners and applicants, which includes:

1. Full legal name;
2. Date of birth;
3. Complete current address;
4. Unique identification number (includes a non-expired passport, driver's license, and state issued identification card); and
5. Image of the document that provides the unique identification number.

If a company was created before January 1, 2024, it will not be required to provide information about the company applicant.

Changes or Corrections to Reports

A domestic reporting company will be required to update the report with FinCEN within thirty (30) days of the change or knowledge of a necessary correction.

Additionally, if a domestic reporting company meets the criteria for any exemption after the filing of an initial report, it must report the change within thirty (30) days of the change.

If a domestic reporting company no longer meets the criteria for any exemption and, thus, is now required to file a report with FinCEN, it will have thirty (30) days to file the report.

Closing Notes

Each report will need to be filed in the manner that FinCEN will require.

If any reader is interested in learning more, please review the final rule codified at 31 CFR 1010, Sec. 1010.380 and which can be found in the Federal Register, 87 FR 59498.