The information presented in this Executive Summary is a high-level overview for educational and informational purposes only and is not intended to constitute legal advice or be regarded as a complete analysis of the subject. Please consult your tax professional and/or attorney regarding your specific circumstances as they relate to the Corporate Transparency Act (CTA) and its requirements. Additional information regarding the CTA, including the Small Entity Compliance Guide and Frequently Asked Questions, is available at https://fincen.gov/boi/small-business-resources.
Background on CTA and Information on Reporting Companies
- The CTA is a federal law that requires certain companies to report information about their beneficial owners to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
- The Reporting Rule requires that all “reporting companies” file Beneficial Ownership Information (BOI) reports with FinCEN within certain timeframes (addressed later in this document). The chart below helps determine what companies are defined as “reporting companies.”
Exemptions from Reporting Requirements
Certain types of entities (below) may be exempt from the reporting requirements.
Beneficial Ownership
- A beneficial owner is any individual who, directly or indirectly:
- Exercises substantial control (see below) over a reporting company; OR
- Owns or controls at least 25 percent of the ownership interests of a reporting company.
- An individual might be a beneficial owner through substantial control, ownership interests, or both.
- A reporting company can have multiple beneficial owners.
- Beneficial owners must be individuals. In cases where the reporting company is owned by a trust, the facts and circumstances surrounding the particular trust determine whether specific trustees, beneficiaries, grantors, settlors, and other individuals with roles in the trust are beneficial owners of the reporting company.
Substantial Control
Reporting companies are required to identify all individuals who exercise substantial control over the company. An individual exercises substantial control over a reporting company if the individual meets any of for general criteria.
- the individual is a senior officer;
- the individual has authority to appoint or remove certain officers or a majority of the directors of the reporting company;
- the individual is an important decision-maker; or
- the individual has any other form of substantial control over the reporting company
Information Required for Filing
Identifying information needs to be submitted for the reporting company and any/all beneficial owner(s).
In lieu of providing the required information, the company may instead provide a FinCEN identifier for the company or beneficial owner. A FinCEN identifier is a unique identifying number that FinCEN will issue to an individual or reporting company upon request after the individual or reporting company provides to FinCEN.
- The same pieces of information listed above must be provided to obtain a FinCEN identifier.
- Because an individual may be a beneficial owner of several reporting companies, obtaining a FinCEN identifier may ease the administrative burden of entering and uploading the required information multiple times.
Timeline for Filing
Initial reports are due based on the date the reporting company was originally created or registered to do business.
Changes to Previously Reported Information
If there is any change to the required information about a company or its beneficial owners, an updated report must be filed no later than 30 days after the change occurred.
Examples of changes that would require an updated report:
- Any change to the information reported for the reporting company.
- A change in beneficial owners
- Any change to a beneficial owner’s name, address, or unique identifying number.
Use of a FinCEN identifier may also make changes less burdensome. The individual who obtained the FinCEN is responsible for keeping their information current.
Penalities for Non-Compliance
The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in civil or criminal penalties. Senior officers of an entity that fails to file a required report may be held accountable for that failure.
- Civil penalties of up to $591 per day (adjusted annually for inflation)
- Criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000.
A person may also be subject to civil and/or criminal penalties for willfully causing a company not to file a required report or to report incomplete or false beneficial ownership information.
