Effective January 1, 2024, the Corporate Transparency Act (CTA) mandates that millions of both newly established and existing businesses (if they are corporations, limited liability companies, or certain other entities) must submit beneficial ownership information (BOI) to the U.S. Department of Treasury's Financial Crimes Enforcement Network (FinCEN).
The goal of the CTA is to address illicit activities, like money laundering and tax evasion, by gathering additional information about the ownership of specific entities operating in or engaging with the U.S. market.
Let’s break down the basics of the CTA and how it can impact your business.
Who is required to file?
Under the CTA, the following business entities (domestic or foreign) must file a BOI report with FinCEN (unless they qualify for an exemption):
- Limited liability companies (LLCs)
- Corporations
- Other entities created by the filing of a document with a Secretary of State or similar office.
Each of these entities is referred to as a “reporting company”.
To help determine if your entity is required to file a beneficial ownership report, take our Beneficial Ownership Information Report quiz.
What information is being reported?
All reporting companies must submit information to FinCEN about the company and its beneficial owners. A beneficial owner is an individual who exercises substantial control over the company or who owns or has control over at least 25% of its ownership interests. There is no set maximum limit on the number of beneficial owners.
In addition, a reporting company created on or after January 1, 2024 is required to provide personal details about the "company applicant." This refers to the individual who files the document to create a domestic company or register a foreign (non-United States) company, and, if there is an individual mainly responsible for overseeing or controlling that filing, it is that individual too.
Reporting requirement due dates
Existing companies have one year from the effective date of the CTA to file a BOI report with FinCEN. However, newly formed or registered companies must file within either 90 days or 30 days of their formation or registration date.
Let’s define what this means and key filing requirements:
- Existing companies: An existing company is an LLC, corporation, or other entity created or registered to do business by filing a document with a secretary of state or similar office, that was created or registered before January 1, 2024. If your company falls within this bracket, it must file an initial BOI report by January 1, 2025.
- New companies:
- A new reporting company is an LLC, corporation, or other entity created or registered by filing a document with a secretary of state or similar office that was created or first registered on or after January 1, 2024, and before January 1, 2025. If this is your company, it must file an initial BOI report within 90 calendar days after receiving notice of the company’s creation or registration (actual or public notice).
- LLC, corporation, or other entity created or registered that were created or registered on or after January 1, 2025 will have 30 calendar days after receiving notice of the company’s registration to file a BOI report.
If there is any change in the information provided about the reporting company or the beneficial owners, including who the beneficial owners are, the company must file an updated BOI report with FinCEN within 30 days of the change. If any of the information reported about the company, its beneficial owners, or company applicants was inaccurate when the report was filed, the company must file a corrected BOI report with FinCEN within 30 days of when it became aware of the inaccuracy.
The CTA does not require reporting companies to file a report annually. The law only requires an initial filing, or updates or corrections, if needed.
Privacy protection
The beneficial ownership information collected by FinCEN is not made public and is only available to certain government agencies and used for law enforcement, national security, and intelligence purposes, as well as financial institutions so they can fulfill certain reporting obligations, regulatory agencies that supervise financial institutions, and the Department of Treasury.
Can I submit BOI information to the Secretary of State or other state corporate filing office?
No. The CTA requires that all BOI reports are submitted directly to FinCEN, or through a third party provider to FinCEN. When forming or registering a business with your Secretary of State or similar office, you are not required to file this BOI report.
Exemptions from the CTA
Not all businesses are subject to the CTA. For instance, publicly traded companies, large operating companies, other regulated entities, and those businesses that meet other specific criteria may be exempt. In addition, businesses that are not LLCs, corporations, or other entities created by filing a document with a secretary of state or similar office are not required to file a report.
Penalties for non-compliance
Willfully failing to file an initial, updated, or corrected report or providing false or fraudulent information can lead to serious consequences. This includes hefty fines and the possibility of facing criminal charges.
Learn more
Take our quiz to determine Beneficial Ownership Information filing status. For more information, visit our Beneficial Ownership Information Report solutions page.
