The Corporate Transparency Act brings major changes to federal regulations surrounding beneficial ownership reporting for certain U.S. companies. Signed into law in January 2021, it mandates gathering identifying details on individuals owning or controlling American corporations, limited liability companies and other specified entities.

This comprehensive guide informs key stakeholders on meeting compliance obligations for the new Beneficial Ownership Information Reports (BOIRs) enforced by the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).

Contact LawInc for help with any sort of legal matter. Free attorney consultation.

We explore critical topics like types of business structures impacted, what beneficial ownership specifics must get reported, deadlines for filing initial and updated disclosures, how submission processes work and penalties for noncompliance. Our aim is to empower organizations in navigating the regulatory landscape as BOIR rules phase in.

Overview

The Corporate Transparency Act brings major changes to reporting requirements surrounding beneficial ownership for certain business entities in the United States.

Who Must Report

• • Corporations, LLCs, and other entities created by filing with a secretary of state or similar office
  • Excludes certain trusts not formed by such filings
  • Foreign entities registering to do business in the U.S.

What Information Gets Reported

• • Full legal names of reporting entities
  • Current business addresses
  • Taxpayer ID numbers like EINs
  • Details on individual beneficial owners, including:
    • Full legal name
    • Date of birth
    • Current residential or business street address
    • A copy of an unexpired, government-issued, identifying document (e.g., passport, driver’s license)
  • Similar details for company applicants

  Beneficial owners include:

  • • Those owning ≥25% equity stake
    • Majority shareholders
    • Those with substantial control

  Who Must Report

  

  • • Domestic Corporations and Limited Liability Companies (LLCs): Traditional C-Corps, S-Corps, single member LLCs etc.
    • Partnerships and Venture Capital Funds: Includes LP, LLP, LLC partnerships plus VC/PE structures.
    • Certain Business Trusts: Statutory trusts filing partnership or corporate tax returns.
    • Foreign Entities Registering in U.S.: Overseas companies registering to do business in America.
    • Some Exemptions Like Large Public Firms: Details below.

  Exempt Entities Include:

  • • Public companies filing SEC reports
    • Tax-exempt nonprofits
    • Banks, credit unions, insurance firms
    • Publically traded commodities/futures brokers
    • Entities with physical business presence + under 20 full-time U.S. employees

  How Exemptions Get Claimed:

  • • File newly exempt entity report with FinCEN
    • Maintain records substantiating eligibility
    • Certain pooled investment vehicles have streamlined process
    • Review criteria every two years confirming still qualify
    • Immediately report to FinCEN if status changes to non-exempt

  Penalties for Improper Exemption Claims:

  • • Civil monetary penalties up to $500 per day
    • Criminal liability for false statements
    • Ineligible for exemption going forward
    • Reputational risks
    • Scrutiny of future regulatory compliance

  What Information Must Be Reported

  

  • • Full Legal Name and Business Address: Of the reporting company submission contact.
    • Taxpayer Identification Number: EIN or SSN associated with the reporting entity.
    • Jurisdiction of Formation: Where the company organized e.g. state.
    • Details on Individual Beneficial Owners: See specifics below.
    • Non-U.S. Entities Must Also Report: Foreign registration jurisdiction.

  Beneficial Owners Include:

  • • Those owning ≥25% equity stake
    • Majority shareholders
    • Those with substantial control
    • Senior officers like CEO, CFO etc.
    • Managers, General Partners, Trustees

  Specific Data Reported on Individuals:

  • • Full legal name
    • Date of birth
    • Address
    • Identity document information
    • Document identifying number

  Penalties for Reporting Violations:

  • • Civil penalty of up to $500 per day for each day a violation continues without cure
    • Criminal penalties for willful failure to report complete or updated BOI, including up to two years of imprisonment and a fine of up to $10,000
    • Bars on opening/maintaining bank accounts
    • Extra scrutiny from regulators
    • Reputational damage

  When Reports Must Be Filed

  

  • • Initial Reports Deadlines: Vary based on entity formation/registration date.
    • Updates Within 30 Days: Of any changes in ownership or control.
    • Correction Deadline – 30 Days: From discovering any report inaccuracies.
    • Streamlined Reporting: For some exempt entities.
    • Calendar Year Reporting: Annual reports not mandated.

  Initial Report Due Dates:

  • • Entities formed before 01/01/24: 01/01/25
    • Formed between 01/01/24-12/31/24: 90 days after formation/registration
    • Formed on or after 01/01/25: 30 days after formation/registration
    • Good faith provision allows some flexibility
    • Foreign entities timeline tied to U.S. registration

  Reporting Exemptions and Streamlining:

  • • File notice of exempt status with FinCEN
    • Some pooled investment vehicles can limit reports
    • Exempt entities must reconfirm status every 2 years
    • Immediate reporting required if conditions change
    • Strict substantiation rules for exemptions

  Late Reporting Penalties:

  • • Up to $500 per day, maximum $10,000
    • Potential criminal liability
    • Possible bars on bank accounts
    • Ban on participating in equity/capital markets
    • Reputational damage

  How to File Reports

  

  • • Use FinCEN’s Beneficial Ownership Secure System (BOSS): The primary portal for submitting Beneficial Ownership Information Reports. Detailed instructions at FinCEN’s BOI Reporting Page.
    • Digital Document Uploads: Required for submitting copies of unexpired, government-issued identifying documents of beneficial owners and company applicants.
    • Two Online Submission Options: File pre-formatted PDF report or enter data interactively through the BOSS platform.
    • Online Account Authentication: Use login.gov single sign-on credentials for secure access.
    • FinCEN Issued Identifier: Can optionally auto-populate for individuals, facilitating future filings.

  Acceptable Identity Documents Include:

  • • Valid state driver’s license
    • Current U.S. passport
    • Tribal ID
    • Foreign passport if no other
    • Identity document issued by state or local jurisdiction

  Tips for Successful Submissions:

  • • Use recommended browser and PDF software
    • Ensure all fields marked required are complete
    • Double check identity document image quality
    • Save confirmation numbers for records
    • Troubleshoot issues using available technical guides

  Contact FinCEN with System Problems:

  • • Via email: [email protected]
    • By phone: 1-800-767-2825
    • Troubleshooting guides also available
    • Support for technical questions on filing process
    • Cannot advise on specific beneficial ownership compliance

  Leverage Resources to Comply

  

  • • Review Extensive FinCEN Guidance Materials: Multiple manuals detail reporting rules.
    • Browse FAQ Databases: Answers to common questions.
    • Watch Recorded Training Webinars: On-demand sessions highlighting best practices.
    • Contact FinCEN Compliance Helpline: Schedule assistance consultation.
    • Confirm Filing Platform Readiness: Ensure technical requirements met.

  Key Compliance Resources:

  • • Beneficial Ownership Information webpage
    • Small Entity Compliance Guide
    • Frequently Asked Questions
    • Fact Sheet
    • Small Business Resources

  No Filing Extensions or Exemptions Possible:

  • • Strict legal deadlines for submissions
    • Requirements apply to both U.S. and foreign entities
    • Exemptions narrowly limited per FinCEN rules
    • Penalties imposed for missed deadlines
    • Immediate reporting for status changes

  Allow Sufficient Implementation Time:

  • • Assess resources and process gaps
    • Identify beneficial owners well ahead of deadlines

  Practical Tips for Compliance

  • • Ensure Accurate and Complete Filings: Double-check that all required information is accurately and completely filled out. Inaccuracies or omissions can lead to penalties.
    • Regular Updates: Keep your filings up to date. If there are any changes in beneficial ownership or company structure, update your report within 30 days.
    • Maintain Records for Audit Trails: Keep detailed records of all filings and supporting documents. This will be invaluable for both internal reviews and in case of external audits.
    • Use Available Resources: Take advantage of the guidance materials provided by FinCEN, such as the Small Entity Compliance Guide and FAQs, to better understand your compliance obligations.
    • Seek Professional Advice: Consult with legal experts familiar with the CTA and BOIR regulations to ensure that your organization is fully compliant.

  Summary

  • • New Rules Enhance Ownership Transparency: Closes information gaps leveraged for financial crimes.
    • Phased Compliance Timelines On Horizon: According to entity type and formation date.
    • Standardized Reporting Protocols Established: Using FinCEN’s BOI secure e-filing platform.
    • Some Exemptions Permitted If Eligibility Maintained: But substantial proof is required.
    • Steep Penalties Enforced For Noncompliance: Both civil fines and criminal liability.

  Key Takeaways:

  • • Perform comprehensive due diligence on all entity beneficial owners
    • Leverage available FinCEN guidance exhaustively
    • Build proper e-filing procedures and test thoroughly
    • Continuously revalidate reporting processes
    • Document decisions and maintain audit trails
    • Consult with an attorney to protect yourself.

Need Help Complying with the Corporate Transparency Act?

Contact us, anytime, if you require assistance with complying with the Corporate Transparency Act.

Test Your Corporate Transparency Act Knowledge