Corporate Transparency Act

  • The Corporate Transparency Act (the “CTA”) is a U.S. federal law that was enacted by Congress on January 1, 2021 as part of the National Defense Authorization Act and is formally an amendment to the Bank Secrecy Act.

    The CTA was enacted in an effort by the U.S. government to combat money laundering, sanctions evasion, terrorist financing and other illicit activity by requiring entities to file reports (known as “Beneficial Ownership Reports”) identifying the entity’s “Beneficial Owners” and, for entities formed on or after January 1, 2024, the entity’s “Company Applicants,” and to file updated reports when previously reported Information changes.

  • The filing requirements of the CTA apply only to “Reporting Companies,” of which there are two types.

    Domestic Reporting Companies include corporations, LLCs and any other entities created by the filing of a document with a secretary of state or a similar office of a U.S. state or tribe. This also includes domestic limited partnerships, limited liability partnerships, limited liability limited partnerships and statutory trusts. Entities that are excluded in most states, as they are typically formed without the filing of a document, include common law trusts created under a will, and domestic general partnerships.

    Foreign Reporting Companies are similar except that they include only entities formed under the laws of a foreign country that later registered to do business in a U.S. State or tribal jurisdiction (under similar filing requirements to domestic Reporting Companies).

    Therefore, the filing requirements of the CTA apply to the vast majority of entities formed or registered to do business in the U.S., unless one or more of its 23 exemptions apply (click here for more information on the CTA’s 23 exemptions).

  • Even if your entity would otherwise be considered a “Reporting Company” under the CTA because it was formed by the filing of a document with a secretary of state or similar office, it nonetheless has no filing obligations under the CTA if any of the CTA’s 23 exemptions apply. Generally speaking, entities falling under one of the CTA’s 23 exemptions are already subject to some sort of reporting requirement elsewhere under existing laws/regulations.

    The 23 exemptions categories are: • Bank • Credit Union • Accounting Firm • Money Services Business • Financial Market Utility • Broker or Dealer in Securities • Securities Exchange or Clearing Agency • Depository Institution Holding Company • Venture Capital Fund Adviser • Investment Company or Investment Adviser • Pooled Investment Vehicle • Securities Reporting Issuer • Governmental Authority • Public Utility • Commodity Exchange Act Registered Entity • Other Exchange Act Registered Entity • Tax-Exempt Entity • Entity Assisting a Tax-Exempt Entity • Subsidiary of Certain Exempt Entities • Large Operating Company (incl. >20 FT employees & >$5 million annual revenue) • Insurance Company • State-Licensed Insurance Producer • Inactive Entity

    Click here to read about each of the CTA’s exemptions in more detail.

CTA Terminology

  • A “Beneficial Owner” is an individual who, directly or indirectly, either (1) exercises substantial control over the Reporting Company, or (2) owns or controls 25% or more of the ownership interests of the Reporting Company. See our blog post titled “Digging Deeper Into the Meaning of ‘Beneficial Owner’ Under the CTA” for more details on the meaning of this term.

  • Each Reporting Company will have up to 2 individuals who may qualify as Company Applicants, which individuals are:

    1. The individual who directly files the document that creates or registers the entity; and

    2. The individual who is primarily responsible for directing or controlling the filing that creates or registers the entity, if more than one person is involved.

    See our blog post titled “Digging Deeper Into the Meaning of ‘Company Applicant’ Under the CTA” for a more in depth discussion of Company Applicants.

  • A FinCEN Identifier is a unique number assigned by FinCEN that can be used in place of personal identifying information, such as name, birth date, address, and identifying document, when reporting Beneficial Ownership information under the CTA.

    FinCEN Identifiers can be obtained both for individuals and for Reporting Companies. Individuals may apply for a FinCEN Identifier at any time, while Reporting Companies may only apply for a FinCEN Identifier either simultaneously with the submission of their initial BOI Report or at any time thereafter.

    See our blog post titled “FinCEN Identifiers – Do I Need One?” for a more in depth discussion of FinCEN Identifiers.

CTA Timing & Filing

  • January 1, 2025:

    Entities formed/registered prior to January 1, 2024 have until January 1, 2025 to file.

    90 days:

    Entities formed/registered on or after January 1, 2024 but prior to January 1, 2025 have 90 days to file.

    30 days:

    • Entities formed/registered on or after January 1, 2025 have 30 days to file.

    • Entities requiring an update to their current information (whether for the entity or its Beneficial Owners) have 30 days from the date of such change to file an updated report, regardless of when the entity was formed.

  • The potential penalties for failing to timely file required BOI Reports under the CTA are severe. Willfully failing to report complete or updated information to FinCEN, or willfully providing false or fraudulent information, may result in civil penalties of up to $591 per day for each day that the violation continues (with no maximum penalty), and/or criminal penalties of up to 2 years’ imprisonment and fines of up to $10,000.

  • No, the CTA does not have a yearly (or other time-based) updated reporting requirement. However, if information about a Reporting Company previously included in a BOI Report changes, an updated report must be filed within 30 days after the change occurs. Therefore, especially given how often previously reported information for certain entities may change, it is important to develop a process for consistently monitoring the most recently reported information for each of your entities. Perfect Form’s ongoing compliance service can be a great way to minimize the risk that any of your entities falls out of compliance.

  • Beneficial Ownership Reports require disclosure of information for the entity itself, the entity’s Beneficial Owners and, if the entity was formed or registered on or after January 1, 2024, the entity’s Company Applicants. For Beneficial Owners and Company Applicants, the attachment of an identifying document, such as a driver’s license or passport, is also required. See our blog post titled “What Information and Documents Does Each BOI Report Require?” for more detailed information on the information that must be disclosed in each report.

  • If an error is discovered in a previously filed BOI report, a corrected report must be filed within 30 days after the Reporting Company has either become aware, or has reason to know, of the error. However, a Reporting Company can remain in compliance if a corrected report is filed within 90 days of the original report’s filing date, regardless of when the error is discovered.

  • FinCEN has advised that the data included in BOI Reports is stored in a secure, non-public database using security methods and controls consistent with those used in the federal government to protect non-classified yet sensitive information systems at the highest security level.

    For authorized activities related to national security, intelligence and law enforcement, FinCEN will permit certain federal, state, local, tribal and foreign officials to obtain certain information in the database. Financial institutions, when the consent of the applicable Reporting Company has been obtained, will also have access to the information for that Reporting Company, as will those financial institutions’ regulators when acting in a supervisory capacity.