Updated October 25, 2024
The federal Corporate Transparency Act (the “CTA”) requires companies to file Beneficial Ownership Information Reports with the US Treasury Financial Crimes Enforcement Network (“FinCEN”) unless they meet an exemption. While the rules are designed to combat money laundering, these rules create reporting obligations for nearly all small businesses.
PLEASE CONTACT US IF YOU NEED ANY HELP DETERMINING WHETHER YOU MUST REPORT AND WHO ARE THE BENEFICIAL OWNERS OF YOUR COMPANY. We are not able to file a CTA report on your behalf, but if you want or need a more streamlined submission process, we can connect you with a third-party service provider that can assist you. Please continue reading for more information about the reporting requirements.
Required Reports:
Companies covered by the CTA must file a Beneficial Ownership Information Report that includes information about the company and about each “beneficial owner.” A “beneficial owner” is someone who owns or controls at least 25% of the company’s ownership interests or exercises substantial control over the company. In addition, the company must identify the person(s) who forms the entity if the company is formed after January 1, 2024. In this case, a “company” generally means an entity formed by filing paperwork with a state, including a corporation or limited liability company.
Information about the company:
A reporting company must provide:
- Its full legal name;
- Any trade names or “doing business as” names;
- A United States street address;
- The jurisdiction of formation or, for foreign companies, location of first US registration; and
- The IRS taxpayer identification number.
Information about individuals:
For each beneficial owner of a company and each company applicant, the reporting company must provide:
- A full legal name (including middle names and suffixes, if any);
- Date of birth;
- Complete current residential street address (or business address for company applicants that form companies in the regular course of business); and
- The unique identifying number, jurisdiction and image of a U.S. passport, state driver’s license or other identification issued by a state, local government or tribe, or, barring the foregoing, a foreign passport.
Alternatively, if an individual obtains a FinCEN identifier, that identifier may be given to the reporting company to use in lieu of providing the information above. Needless to say, you will need to submit all of the information above to FinCEN in order to get an identifier.
Exemptions:
There are currently 23 exemptions from reporting, most of which cover entities that are already regulated by or registered with the federal government in some way. In addition, large operating companies and wholly-owned subsidiaries of large operating companies (or of certain other entities that are exempt from reporting) are exempt. A large operating company is one that has:
- More than 20 full time employees in the United States;
- An operating presence at a physical office in the United States, and
- Filed an income tax return or informational return for the previous year showing at least $5,000,000 in gross receipts or sales not including sources outside the United States.
Timing:
The initial Beneficial Ownership Report must be filed:
- Within 90 days of entity formation, for entities formed on or after January 1, 2024 and before January 1, 2025;
- By January 1, 2025, if your entity was formed before January 1, 2024; or
- Within 30 days of entity formation, for entities formed on or after January 1, 2025.
- If any information changes on your report, you must update the report within 30 days.
- If you discover any inaccuracy in a report, you must update your report within 30 days of becoming aware of the inaccuracy, and there will be no penalties if the correction is made within 90 days of the filing.
Penalties apply if reports are not made or updated when required. Note, we are not able to monitor for changes with your entity and you will need to have a system in place to ensure you update the report when needed.
How to report:
The reports must be filed with FinCEN. There are many third-party companies that can assist with reporting, and we are happy to connect you with SingleFile, which has a useful interface to assist with the filing process for a fee. Alternatively, you can directly file with FinCEN at https://fincen.gov/boi.
Court Case:
A federal court ruled the CTA was likely unconstitutional and issued an injunction prohibiting FinCEN from enforcing the CTA against these specific plaintiffs in the case. Because of that limitation, most businesses must still comply with the CTA.
State Laws:
Several states have passed or are looking at passing laws similar to the CTA, which may have their own filing requirements that are separate from the CTA. You may want to determine if your state has a reporting obligation. Currently, the state of Oregon has no such law.
Please contact any member of our Business Organizations Practice Group if you need any help determining whether you must report and who are the beneficial owners of your company.
This article provides general information and should not be construed as legal advice or a legal opinion on any specific facts or circumstances. If you have specific legal questions, you are urged to consult with an attorney concerning your own situation.