Corporate Transparency Act: New FINCEN Reporting Requirements

Published Date
Feb 12, 2024
On January 1, 2024, the Corporate Transparency Act (CTA) went into effect. The CTA aims to combat illicit financial activity and enhance national security interests by requiring certain entities to file beneficial ownership information reports (BOI Reports) with the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).

The CTA applies to many types of entities including limited liability companies (LLCs)–even single-member LLCs–but it does not apply to the type of trusts that are typically created for estate planning purposes or tax-exempt entities. It does apply to trusts created by filing with a secretary of state (or similar office) under the laws of a U.S. state or Tribal jurisdiction, and foreign trusts registered to do business in any U.S. state or Tribal jurisdiction.

New York has followed suit, enacting the New York LLC Transparency Act (NYLTA) to amend New York’s LLC law to require the disclosure of beneficial ownership information. NYLTA will be effective on December 21, 2024.

What Entities Are Required to Report?

The reporting requirements apply to the following corporations, limited liability companies and other similar entities (Reporting Companies) that do not qualify for one of the CTA’s 23 specific exemptions (the most relevant of which are described below). 

There are two types of Reporting Companies:

  • Domestic Reporting Company: any entity (including corporations and limited liability companies) created by filing with a secretary of state (or similar office) under the laws of a U.S. state or Tribal jurisdiction; and
  • Foreign Reporting Company: any entity (including corporations and limited liability companies) formed under the laws of a foreign country and registered to do business in any U.S. state or Tribal jurisdiction.

Exempt Entities Include (but are not limited to): (a) entities that: (i) have more than 20 full-time employees in the U.S.; (ii) report more than $5 million in annual U.S. revenue for the previous year; and (iii) operate out of a physical location in the U.S.; (b) SEC-registered issuers; (c) tax-exempt entities; (d) certain financial institutions; (e) certain inactive entities; and (f) domestic pooled investment vehicles.

When Must Reporting Companies File Initial BOI Reports With FinCEN?

  • A Reporting Company that was created or registered to do business in the U.S. before January 1, 2024, must file its initial BOI Report with FinCEN before January 1, 2025.
  • A Reporting Company that is created or registered to do business in the U.S. on or after January 1, 2024, but before January 1, 2025, must file its initial BOI Report with FinCEN 90 calendar days from the date such Reporting Company was created or registered to do business in the U.S.
  • A Reporting Company that is created or registered to do business in the U.S. on or after January 1, 2025, must file its initial BOI Report with FinCEN 30 calendar days from the date such Reporting Company is created or registered to do business in the U.S.

What Must Reporting Companies Report to FinCEN?

Reporting Companies must disclose the following information in their initial BOI Report and must file updated or corrected information (other than Company Applicant information) within 30 calendar days after the date on which the change to such information occurred:

  • Reporting Company Information:
  • Full legal name
  • Any trade name or “doing business as” (DBA) name
  • Address of principal place of business in the U.S.
  • State, Tribal or foreign jurisdiction of formation or registration
  • IRS Tax Identification Number
  • Beneficial Owner Information: For each individual who directly or indirectly (a) exercises “substantial control” over a Reporting Company, or (b) owns and controls at least 25% of the “ownership interests” of a Reporting Company (a Beneficial Owner) such individual’s:
  • Full legal name
  • Date of birth
  • Current residential street address (in or outside of the U.S.)
  • Image of an acceptable identification document (i.e., driver license or passport), and the unique identifying number and issuing jurisdiction of such document
  • Company Applicant Information: If a Reporting Company was created or registered to do business in the U.S. on or after January 1, 2024:
  • For each individual who directly filed the document that created or registered the Reporting Company, and, for each individual, if any, who was primarily responsible for directing or controlling such filing (each, a Company Applicant), the same information as for a Beneficial Owner, except that, if a Company Applicant forms or registers Reporting Companies in the course of his or her business, a business address may be reported instead of a residential address.
  • Reporting Companies that are required to file Company Applicant information (a) may report only two Company Applicants if they have more than one, and (b) are not required to file an updated BOI Report if information about a Company Applicant changes.

Note that Reporting Companies, Beneficial Owners and Company Applicants may obtain a unique FinCEN identifier through https://fincenid.fincen.gov/landing, and the Reporting Company may report that number, instead of all of the above information, each time it files. FinCEN identifier information must be updated or corrected no later than 30 calendar days after the date on which the change to such information occurred.

How Are BOI Reports Filed?

BOI Reports are submitted electronically through https://boiefiling.fincen.gov/fileboir.

What Are the Penalties for Failure to Comply?

The willful failure to report complete or updated information in a BOI Report, or the willful provision of, or attempt to provide, false or fraudulent information in a BOI Report, may result in civil penalties (up to $500 per day that the violation continues) or even criminal penalties (imprisonment for up to 2 years and/or a fine of up to $10,000). Senior officers of a Reporting Company that fail to file a required BOI Report may be held accountable for that failure.

The CTA provides a safe harbor from penalty for inaccurate information in a BOI Report if such information is corrected within 90 calendar days of the deadline for filing the original BOI Report.

If you have any questions regarding these new reporting requirements, or if you would like us to assist with filing a BOI Report, please contact the Private Client Team.

Content Disclaimer
This content was originally published by Shearman & Sterling before the A&O Shearman merger