Effective January 1, 2024, Section 6403 of the Corporate Transparency Act (the CTA), as implemented by regulations published at 31 CFR 1010.380 (the “Reporting Rule”), requires many entities, unless they are exempt, to file information about their beneficial ownership with the Financial Crime Enforcement Network (FinCEN), a bureau within the U.S. Department of Treasury. An entity required to file a beneficial ownership report is referred to below as a “Reporting Company.”  The following summarizes some key points relating to filing under the Reporting Rule. 

Some key deadlines are:

• Each Reporting Company formed before 2024 must file its report with FinCEN by 12-31-2024.
• Each Reporting Company formed in 2024 must file its report with FinCEN not later than 90 days after formation.
• Each Reporting Company formed in 2025 or later must file its report with FinCEN not later than 30 days after formation.
• An existing entity which is an exempt entity, if it no longer qualifies as an exempt entity, must file its report as a Reporting Company with FinCEN not later than 30 days after it is no longer exempt.
• Each Reporting Company must file an amended report not later than 30 days after any change in the information previously reported to FinCEN.

Reporting Companies include corporations, limited liability companies, limited partnerships, limited liability limited partnerships and any other entities formed by filing with a secretary of state or similar official.  Companies formed in the U.S. as well as foreign companies which register to do business in the U.S. are required to report.  A Reporting Company has to provide to FinCEN, with respect to itself, the following information:

• Full legal name of the Reporting Company
• Any trade names or dba names used by the Reporting Company
• A complete current street address of the principal place of business in the U.S., or if the Reporting Company does not have a principal place of business in the U.S., the street address of the primary U.S. location where it conducts business
• The state, tribal, or foreign jurisdiction of formation of the Reporting Company
• If the Reporting Company is a foreign company, the U.S. state or tribal jurisdiction where the Reporting Company first registers to do business
• An Employer Identification Number (EIN) for a domestic Reporting Company or other identification number for a foreign entity which does not have a U.S. identification number.

Each Reporting Company must also provide information regarding its “Beneficial Owners.”  A Beneficial Owner is any individual who directly or indirectly exercises substantial control over the Reporting Company or who owns or controls at least 25% of the ownership interests of the Reporting Company.  The items of information which must be provided for each Beneficial Owner are:

• Name of individual
• Date of birth of individual
• Home street address of individual
• Unique identifier number of individual from U.S. passport, or state issued driver’s license.
• An image of the identification document containing the unique identifier number

An individual may file his or her information with FinCEN directly and obtain a “FinCEN Identifier” which is a unique identifying number which can be provided to any Reporting Company.  The Reporting Company would then provide this FinCEN Identifier to FinCEN in its beneficial ownership report, in lieu of the full information for the individual Beneficial Owner.

The Reporting Rule also requires Reporting Companies formed in 2024 and later to report information on its “Company Applicants.”  A Company Applicant is the person filing the documents to form the Reporting Company as an entity and the person directing the person making such filing to make the filing.   For example, a paralegal filing formation documents for an LLC, as well as the attorney directing the paralegal, each would be a Company Applicant of the LLC.   The information required for Company Applicants is the same as for Beneficial Owners (except the business street address is used instead of the home street address of the Company Applicant), and a Company Applicant may obtain and furnish to the Reporting Company a FinCEN Identifier to use in its filing with FinCEN.     

            There are 23 exemptions contained in the Reporting Rule.  Most of them pertain to companies which are already required to file ownership and control information with federal or state regulators.  One exemption which may be of general interest is the one for a “large operating company.”  A large operating company is an entity which meets all of the following requirements:

• The entity must employ in the U.S. more than 20 full time employees (at least 30 hours per week)
• The entity must regularly conduct its business at a physical location in the U.S. that the entity owns or leases
• The entity must have filed a federal income tax return for the previous year demonstrating more than $5,000,000 in gross receipts or sales from U.S. sources

The determinations of who exercises substantial control and who owns or controls at least 25% of the ownership interests in a Reporting Company is, for some Reporting Companies, a simple matter, but Reporting Companies with more complex structures will need to carefully study the Reporting Rule to make these determinations.   FinCEN has issued a Small Entity Compliance Guide which may be helpful in answering many questions.  It is available at  https://www.fincen.gov/boi/small-entity-compliance-guide. 

Civil penalties of up to $500 per day the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000, may be assessed for the willful failure to report complete or updated beneficial ownership information to FinCEN as required by the Reporting Rule.  A senior officer of a Reporting Company who fails to file a required report with FinCEN may be held accountable for that failure.   Additionally, a person may be subject to civil and/or criminal penalties for willfully causing a Reporting Company not to file a required report or to report inaccurate or false information to FinCEN, such as by refusing to provide information or by providing false information.