Why you should take action regarding the Corporate Transparency Act (CTA)

Why you should take action regarding the Corporate Transparency Act (CTA)

The Corporate Transparency Act (“CTA”)

What is the Corporate Transparency Act

Companies must file  Beneficial Ownership Information (“BOI”) on individuals who own substantial pieces of, or otherwise control the company to the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”), no matter what state, possession, or tribe they are incorporated in.


What Is A Company

A “Company” is an entity formed by filing a document with a secretary of state or similar office under state or tribal law. Thus, corporations, LLCs, Trusts that are filed with a State, and limited partnerships are Companies.  Foreign entities registered to do business in the U.S. are also considered Companies under the CTA. This pretty much covers 90% of the companies in the US or that are doing business in the US.  Trusts that are not filed with the state do not need to be filed.


Who Does Not Have To File

There are several exemptions from the Beneficial Ownership reporting requirements. Most of these cover entities already subject to oversight, such as publicly traded companies, banks and other financial institutions, investment companies, insurance companies, governmental entities, and public utilities. Most accounting firms are exempt, as are non-profits and other tax-exempt entities. Also, large operating companies with $5 million in annual revenues and 21 plus employees with an office inside the US, and their business coming from within the US do not have to file, nor do any subsidiaries under exempt companies.


When To File

Reporting Companies formed after January 1, 2024, will need to file reports within 30 days after formation. Reporting Companies already existing at the end of 2023 will need to file their initial reports by January 1, 2025.


Who Has Access To This Information

This information will be available to federal law enforcement agencies (including the Treasury and the IRS), and state and local law enforcement agencies with prior court approval. Foreign agencies may also ask for access to the information, either under an international treaty or as part of certain investigative procedures. Finally, financial institutions and their regulators may obtain access for purposes of satisfying their Know Your Customer requirements. These filings will not be made available to the general public.


What Is A Beneficial Owner

A “Beneficial Owner” is any individual who, directly or indirectly, either (i) exercises substantial control over a reporting Company, or (ii) owns or controls at least 25% of the ownership interests of a reporting Company.

“Substantial control” means serving as a senior officer, having authority over the appointment or removal of a senior officer or a majority of the board (or similar body), directing important decisions, or having any other form of substantial influence or control over a reporting Company.

“Ownership interests” are broadly defined and can include profits interests, convertible notes, and options to acquire equity interests. The CTA seeks to look through any holding company owners to identify the individuals who ultimately have substantial interests in a company.


How To File 

The filing will be done online.

You will need the full legal name of the company, where it was formed, the physical mailing address of the reporting Company,(mail drops or PO Boxes not accepted), any d/b/a names that have been registered, and its Tax ID number.

The following information will be required for each Beneficial Owner:  (1) full legal name, (2) date of birth, (3) current residence address, and (4) the person’s unique identifying number from a passport, driver’s license, or other government-issued document, including a copy of the document which includes a picture.

If you are filing on a company formed after January 1, 2024, then you will also need to report each “Company Applicant”. A “Company Applicant” is the individual who directly files the formation documents (or registration documents for a foreign Reporting Company), as well as the individual primarily responsible for directing the filing.  (If you have had us file your corporate documents after January 1, 2024, we will provide you with this information for your filing.)


Does This Need To Be Filed Yearly

No.  But if you change the address of the company, any owner’s address changes, ownership of the company changes, or the company’s exempt status changes, these changes need to be reported within 30 days of any change.


What Happens For Not Filing

The law sets forth multiple penalties for non-compliance, providing for both criminal and civil penalties.  Any person who provides false information, or fails to report complete or updated information, is subject to a civil penalty of not more than $500 for each day that the violation continues, and may face fines of not more than $10,000, imprisonment for not more than two years, or both.  Separate from the CTA, persons could face criminal liability under the federal criminal code, which prohibits knowingly and willfully providing false information or concealing a material fact to any of the three branches of the federal government.


Do I Still Need Your Privacy Packages

The ownership information you give is not public, so to keep your name off the State public records you will need to use our privacy packages.


How Will An Aged Company Be Handled

On companies formed before 2025, you will need to file the information on ownership by January 1, 2025.  After January 1, 2025, you will need to file within 90 days of the formation of the company.


Do You Have Someone That Can File For Us

Yes, we provide a service for this initial filing and a recurring service to maintain information in the FinCen BOI database.  If you would like us to contact you with additional information regarding this service, when it becomes available, please click here to link to that page.