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FOS previously advised clients of the mandates of the Corporate Transparency Act (CTA), a federal law requiring corporations, limited liability companies, and other entities to report identifying information, including that of beneficial ownership.;; The CTA mandates will have a significant impact on small businesses, and their owners, including LLCs and any business with less than 20 employees and less than $5 million in sales or gross receipts.

Starting January 1, 2024, entities must, as applicable, begin submitting required reports electronically through the Financial Crimes Enforcement Network’s (FinCEN) website. FinCEN’s website will have more information about accessing the reporting system when it becomes available.

The reporting deadline for entities formed before January 1, 2024, is January 1, 2025.

However, entities formed on or after January 1, 2024, and before January 1, 2025, will have 90 days to file reports.

Entities formed on or after January 1, 2025 will have 30 days to file reports.

There is no annual requirement to file reports. However, once an initial report is filed, any change to beneficial ownership information must be updated within 30 days. The 30-day deadline also applies to entities who wish to correct inaccuracies in previously reported information.

Information to Report

“Reporting companies” include domestic and foreign companies created by, or registered to do business in the U.S. through, filing a document with the secretary of state or similar office. FinCEN expects reporting companies will include (subject to specific exemptions) corporations, limited liability companies, limited liability partnerships, limited liability limited partnerships, business trusts, and most limited partnerships.

A reporting company’s full legal name, including any trade name; complete current U.S. address; state, tribal, or foreign jurisdiction of formation; and IRS taxpayer identification number, including employer identification number, must be reported.

A “beneficial owner” includes any individual who, directly or indirectly, (1) exercises substantial control over a reporting company; or (2) owns or controls at least 25 percent of the ownership interests of a reporting company.

A beneficial owner’s full legal name, date of birth, complete current address; unique identifying number and issuing jurisdiction, and image of a non-expired document issued by the federal government (or, if none, a passport issued by a foreign government) must be provided.

Finally, for entities created or first registered to do business in the U.S. on or after January 1, 2024, CTA requires the reporting of a “company applicant.” A “company applicant” means the individual who filed an application to create the entity or registered it to do business in the U.S., and the individual who is primarily responsible for directing or controlling such filing (if more than one individual participates in the filing).

Information to report for a company applicant is the same as for a beneficial owner.

Reporting Exemptions and Exceptions

The CTA outlines twenty-three types of entities exempt from the definition of “reporting company,” and so not subject to the reporting requirements. These include banks and insurance companies. They also include “large operating companies” defined as entities with an operating presence at a physical office in the U.S., employing more than 20 full-time employees in the U.S., and reporting more than $5 million in gross receipt or sales on the previous year’s federal tax return (excluding gross receipts or sales from sources outside the U.S.)

There are also exceptions to the definition of “beneficial owner.” For example, if the individual who would otherwise be a beneficial owner is a minor, the reporting company can report information about the parent or legal guardian instead.

Reporting exceptions also exist for individuals who merely act on behalf of beneficial owners, such as custodians; certain employees deriving control over the reporting company through their employment status; individuals with a future interest in the reporting company through a right of inheritance; and creditors of reporting companies.

FOS advises you of these reporting requirements so that you can take proper steps to comply with the law. If you have questions about your company’s obligations, contact your FOS attorney.