5 Questions Answered About the Corporate Transparency Act

December 22, 2023
Compliance, rules, regulations
Keeping your business compliant is an important aspect of your operation policy.

The Corporate Transparency Act (CTA) – A Brief Overview:

In 2021, Congress approved of a statute requiring the Corporate Transparency Act (CTA), which will require small businesses to file beneficial owner information with the Financial Crimes Enforcement Network (FinCEN).  The aim of the CTA is to prevent bad actors from concealing the identities of those responsible for business entities in the United States who may engage in tax fraud, money laundering, funding of terrorism, or other illegal activities.

The CTA beneficial ownership reporting requirement goes into effect on January 1, 2024.  With a few exceptions, all small businesses will be required to report.

For more information, you may visit our FAQs, which will be updated from time to time as warranted.  For more detailed information see the FinCen Beneficial Ownership Reporting web page.  In addition, FinCEN has also prepared a very helpful Small Entity Compliance Guide which contains valuable information.

When can I file my report?

Beneficial ownership reporting begins January 1, 2024.  No filings will be accepted before that date.

Where do I file beneficial ownership information?

All reporting will be done via a secure filing system on FinCEN’s portal, which will become available on the beneficial ownership site when reporting begins.

When do I have to file my report?

Reporting entities formed before January 1, 2024 will have until January 1, 2025 to file.

New entities formed on or after January 1, 2024 must file within 30 days of the receipt of notice of the company’s creation or registration.*

Do I have to file every time I register my company to do business in another state?

No.  The reporting is only required at the time of initial formation/creation or registration anywhere in the US.  So, for example, if your company was formed in Canada, but registers to do business in California, it will be necessary to report beneficial ownership information within 30 days of the California registration.  On the other hand, if the company was formed in Delaware and further registers to do business in Florida, the reporting is only done within 30 days of formation in Delaware.*

*Please note:  FinCEN has granted an extended period for all entities formed or registered between January 1, 2024 and December 31, 2024.  Those entities created during 2024 will have 90 days from the receipt of notice of creation or registration to file.  They grace period will revert to 30 days beginning January 1, 2025.

Is every company required to report?

There are some entities that may be exempt from this reporting requirement. The reporting rule specifies 23 specific types of entities that are exempt from the beneficial ownership reporting.  They are:

1 Securities reporting issuer
2 Governmental authority
3 Bank
4 Credit union
5 Depository institution holding company
6 Money services business
7 Broker or dealer in securities
8 Securities exchange or clearing agency
9 Other Exchange Act registered entity
10 Investment company or investment adviser
11 Venture capital fund adviser
12 Insurance company
13 State-licensed insurance producer
14 Commodity Exchange Act registered entity
15 Accounting firm
16 Public utility
17 Financial market utility
18 Pooled investment vehicle
19 Tax-exempt entity
20 Entity assisting a tax-exempt entity
21 Large operating company
22 Subsidiary of certain exempt entities
23 Inactive entity

FinCen’s Small Entity Compliance Guide provides a checklist for these exemptions to make it easier to determine if your company qualifies.

What can you do to prepare?

First and foremost, it is important to educate yourself regarding the requirements.  The information you’ll find here will be helpful, but you will find more details and an extensive FAQ on the FinCEN website.  FinCEN also has a contact form for questions relating to the BOI reporting requirements.

Second, existing companies should decide when they plan on reporting and begin gathering the information needed for the report.  For entities formed or registered prior to January 1, 2024, we encourage you to file later in 2024 to avoid being part of an early rush to file.  Keep in mind that this process is new to everyone, including FinCEN.  As with any new filing systems, it seems quite reasonable to expect some breaking-in issues.  A little preparation and planning on the part of the reporting company will go a long way to relieving stress with this new requirement.

Third, please visit our full CTA FAQs for more information.  We are adding new questions and answers on a regular basis so please be sure to bookmark this page.  Moreover, we have a site page dedicated to the Corporate Transparency Act (CTA) which you’ll find under the Company Formation menu in our header.  This page will also be updated as needed.

Finally, we strongly urge you to sign up for FinCen’s news updates.  They have been quite regular in providing updated information in our experience.