The Corporate Transparency Act (CTA) imposes significant new reporting requirements on many small businesses, as of January 1, 2024. The law requires all “reporting companies” to identify their “beneficial owners” and “company applicants” in a report to be filed with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). Determining whether an entity is a reporting company and identifying its beneficial owners involve substantive legal questions that may require legal analysis and advice from counsel.
Saul Ewing’s CTA Compliance team advises businesses in real estate, private equity, and various other industries on their obligations under the law, as well as its impact on transactions. Our services include:
- Analysis: collecting and reviewing all relevant corporate documentation; conducting an analysis to determine whether an entity is a reporting company, whether any exemptions apply, and identifying the entity’s beneficial owners
- Reporting: preparing and filing any required reports with FinCEN
- Compliance: providing ongoing CTA compliance triggered by transactions or changes in beneficial ownership
Frequently Asked Questions
The following are answers to some basic question about the Corporate Transparency Act. For more information, please refer to FinCEN’s resource page on Beneficial Ownership Information.
What is the Corporate Transparency Act?
Congress enacted the Corporate Transparency Act (CTA) in 2021 as part of the U.S. government’s efforts to combat money laundering, terrorist financing, tax fraud, and other illicit activities. It is designed to ensure that U.S. law enforcement can identify the individuals connected to entities operating in or accessing the U.S. market. The law requires all “reporting companies” to identify their beneficial owners and company applicants.
What does the CTA do?
The CTA establishes a uniform beneficial ownership information (BOI) reporting requirement for certain business entities. A BOI Report is filed with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The information will be collected in a non-public database only accessible for law enforcement or national security purposes.
What is a reporting company?
Domestic reporting companies are corporations, limited liability companies, or other similar entities created by filing a document with a Secretary of State or similar office under the law of any U.S. State or Indian Tribe. Foreign reporting companies are entities registered to do business by filing a document with a Secretary of State or similar office under the law of any U.S. State or Indian Tribe.
Are there any exemptions?
The law lays out 23 specific exemptions, largely for regulated entities (such as banks) that are already required to report their beneficial owner information. There is also an exemption for large operating companies, defined as companies with more than 20 full-time employees that have an operating presence in the U.S. and that filed a federal income tax return demonstrating over $5 million in gross income the previous year.
What information is reported?
Beneficial ownership information includes personal data on the reporting company, each beneficial owner, and every company applicant.
Who is a beneficial owner?
Beneficial owners are broadly defined as individuals that exercise substantial control over a reporting company or own/control at least 25% interest in the reporting company.
Who is a company applicant?
Company applicants are the individuals involved in forming and registering the entity with the Secretary of State.
When must the report be filed?
Existing reporting companies created on or registered to do business before January 1, 2024, must file their initial BOI reports by January 1, 2025. Reporting Companies created or registered after January 1, 2024, must file an initial BOI Report within 30 days of the earlier of (1) the date of receipt of actual notice of the entity’s creation or registration; or (2) the date of first public notice provided by the applicable Secretary of State or similar office. In addition, previously exempt entities that become reporting entities have 30 days to file.
CTA Compliance: A Guide for In-House Legal Professionals
