What is the Corporate Transparency Act?
The Corporate Transparency Act (CTA) is a federal law passed in 2020 which introduces new compliance requirements for small businesses. As part of the CTA, business entities in the U.S. are required to report information about their beneficial owners and important decision makers to FinCEN – the Financial Crimes Enforcement Network. These new reports are called “Beneficial Ownership Information Reports” and can be submitted starting the effective date of the CTA, January 1st, 2024.
More on the Corporate Transparency Act (CTA)
The Corporate Transparency Act (CTA) is the largest federal regulation of small businesses in United States history. The CTA impacts over 30 millions businesses and requires them to disclose personal information about the individuals who own and control the company.
Who is FinCEN?
The Financial Crimes Enforcement Network (FinCEN) is a bureau of the United States Department of the Treasury. FinCEN’s mandate is to investigate and prevent financial crimes, like money laundering and terrorist financing.
What is BOIR?
An acronym for Beneficial Ownership Information Reporting, BOIR is how companies will submit names, addresses, and other personally identifiable information of its beneficial owners and other significant individuals to FinCEN.
Is Anyone Exempt from BOIR?
FinCEN provides some companies with exemptions from the Beneficial Ownership Information reporting requirements. There are 23 types of companies that are exempt from reporting, but most exempt business are already registered with a regulatory or government agency.
What Can I Do Before January 1 2024?
Understanding the complexities of FinCEN’s 56-page Small Entity Compliance Guide can be intimidating, but we have you covered with our easy-to-understand breakdown. Gather key points and follow steps to bolster your company’s planning success.
Report By Your Deadline:
Due dates for Beneficial Ownership Information reports depend on the date that the company was formed.
Which Businesses Are Exempt From BOI Reporting?
FinCEN provides exemptions for businesses that meet specific criteria:
Large Operating Companies*
- 21+ Full-Time U.S. Employees
- Physical Office in the U.S.
- More than $5 million in revenue
- Created Before 2020
- No Active Business Operations
- No Changes in Ownership
- No Company Assets
- No Foreign Owners
- Income Less than $1,000
- 501(c)(3) Nonprofits
- 517(e)(1) Political Organizations
- 4947(a) Trusts
- Other Tax-Exempt Entities
* Must meet all following criteria to be exempt.
- Securities Reporting Issuers
- Governmental Authorities
- Credit Unions
- Depository Institution Holding Companies
- Money Services Businesses
- Securities Broker Dealers
- Securities Exchange and Clearing Agencies
- Exchange Act Registered Entities
- Investment Companies and Advisers
- Venture Capital Fund Advisers
- Insurance Companies
- State-Licensed Insurance Producers
- Commodity Exchange Act Entities
- Accounting Firms
- Public Utilities
- Financial Market Utility
- Pooled Investment Vehicles
- Tax-Exempt Entities
- Entities Assisting Tax Exempt Entities
- Large Operating Companies
- Subsidiaries of Exempt Entities
- Entities Inactive Prior to Jan 1, 2020
Frequently Asked Questions
Find answers to your important questions about the Corporate Transparency Act and Beneficial Ownership Information reporting.
- What is the Corporate Transparency Act?
- What is Beneficial Ownership Information?
- Who Can Access Company Beneficial Ownership Information?
Enacted as a part of the Anti-Money Laundering Act of 2020 in the National Defense Authorization Act for Fiscal Year 2021, the Corporate Transparency Act (CTA) ordered the Financial Crimes Enforcement Network (FinCEN) to establish a database for collecting and maintaining beneficial ownership information of domestic entities, and foreign entities that are registered to do business in the United States.
Complying with CTA requires a reporting company to submit Beneficial Ownership Information(BOI) reports directly to FinCEN - The Financial Crimes Enforcement Network.
Businesses, both domestic and foreign, formed before January 1, 2024 will be required to submit their Beneficial Ownership Information no later than January 1, 2025.
New companies, formed on or after January 1, 2024, will have 30 calendar days to submit their Beneficial Ownership Information initial reports to FinCEN.
Beneficial Ownership Information (BOI) is specific information about the real people who are a company’s ultimate beneficial owners and important decision makers that need to be included in a FinCEN BOI report.
Who qualifies as Beneficial Owners? Beneficial owners are defined by FinCEN as individuals who either:
- Own at least 25% of a company.
- Exercise substantial control over the company.
For instance, a company might have three owners, each controlling 25% stake, while a senior figure, like the President, might be recognized as a beneficial owner due to their influential position, even without the 25% stake.
Information Required for Each Beneficial Owner:
- Full Legal Name
- Date of Birth
- Complete Current Address
- ID Document Number
- ID Document Image
Reporting Company Information to Submit:
- Full Legal Name (inclusive of corporate ending)
- Entity Type (e.g., LLC, Corporation)
- Jurisdiction (state of formation or registration)
- Principal Business Address (excluding the registered agent address)
- Federal Tax ID Number (either EIN or ITIN)
- All Trade Names and aliases (known as Doing Business As or DBAs)
FinCEN grants access to Beneficial Ownership Information to Federal, State, local, Tribal, and specific foreign officials, but these requests must be channeled through a U.S. federal government agency. Access is strictly for purposes tied to national security, intelligence, money laundering, and other law enforcement purposes.
Financial institutions can gain access under limited scenarios and must:
- Only request in specific circumstances.
- Obtain consent from the reporting company in question.
Being the first Beneficial Ownership Information registry in the U.S., FinCEN is actively crafting guidelines regarding access and data management. Key objectives include:
- Ensuring proper access protocols.
- Guaranteeing information usage aligns solely with authorized purposes.
- Securing database access against bad actors by implementing the highest government FISMA level standards