Corporate Transparency Act (CTA) – Beneficial Ownership Information (BOI) Reporting Requirements

1. Introduction.

Under the federal Corporate Transparency Act (the “CTA”), your company may be required to report personal information about its Beneficial Owners (generally speaking, persons who own or control the company, as more fully described below) to the Financial Crimes Enforcement Network (“FinCEN”), which is a bureau of the U.S. Department of the Treasury. The report is called a Beneficial Owner Information Report (a “BOI Report”).  Your company and/or its Beneficial Owners may face significant penalties for failing to satisfy the reporting requirements.

2. When Are Reports Due?

  • For companies formed before January 1, 2024, the initial BOI Report must be filed on or before December 31, 2024.
  • For companies formed on or after January 1, 2024, the initial BOI Report must be filed within 90 days after the date of formation.
  • Companies must also report any change in Beneficial Owner Information within 30 days after the change.

3. Who Must Report? (Reporting Companies and Exemptions)

All “Reporting Companies” who are not exempt from the rules must file BOI Reports.

A company is a “Reporting Company” if it is a corporation or a limited liability company or was otherwise created by the filing of a document with a secretary of state or similar office under the law of a State or Indian tribe (for example, a limited liability partnership).1

The rules exempt 23 types of entities from the reporting requirements.  Those exempt entity types 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 Adviser
  11. Venture Capital Fund Adviser
  12. Insurance Company
  13. State-Licensed Insurance Producer
  14. Commodity Exchange Act Registrant
  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

Because the Large Operating Company and Inactive Entity exemptions are the most common potential exemptions, they are explained in more detail below.

An entity qualifies for this exemption if all six of the following criteria are met:

    1. The entity employs more than 20 full-time employees (as defined in 26 CFR 54.4980H-1(a) and 54.4980H-3);2
    2. More than 20 full-time employees of the entity are employed in the “United States” (as that term is defined in 31 CFR 1010.100(hhh));
    3. The entity has an operating presence at a physical office within the United States;3
    4. The entity filed a Federal income tax or information return in the United States for the previous year demonstrating more than $5,000,000 in gross receipts or sales;4
    5. The entity reported this greater-than-$5,000,000 amount as gross receipts or sales (net of returns and allowances) on the entity’s IRS Form 1120, consolidated IRS Form 1120, IRS Form 1120-S, IRS Form 1065, or other applicable IRS form; and
    6. When gross receipts or sales from sources outside the United States (as determined under Federal income tax principle) are excluded from the entity’s amount of gross receipts or sales, the amount remains greater than $5,000,000.
  • Inactive Entity Exemption

An entity qualifies for this exemption if all six of the following criteria are met:

    1. The entity was in existence on or before January 1, 2020;
    2. The entity is not engaged in active business;
    3. The entity is not, directly or indirectly, wholly or partially owned by a foreign person;5
    4. The entity has not experienced any change in ownership in the preceding 12-month period;
    5. During the preceding 12-month period, the entity has not, directly or through any financial account in which the entity or any affiliate had an interest, sent or received any funds in an amount greater than $1,000; and
    6. The entity does not otherwise hold any kind or type of assets, whether in the United States or abroad, including any ownership interest in any corporation, limited liability company, or other similar entity.

4. Who is a Beneficial Owner?

If your company is a Reporting Company, it is necessary to identify its Beneficial Owners.

A “Beneficial Owner” is anyone who, directly or indirectly:

  1. Exercises substantial control over the company;6 OR
  2. Owns or controls at least 25 percent of the ownership interests of the company.

Many companies will have more than one Beneficial Owner.  For example, suppose each of John and Joe own 50% of a manager-managed limited liability company, and Jane (who does not have any direct or indirect ownership interest) is the company’s Manager.  Each of John, Joe and Jane would be a Beneficial Owner of the company.

Trusts

It is common for companies to be wholly or partially owned or controlled by trusts.  While a trust itself is not a Beneficial Owner, one or more individuals associated with the trust are.  For example, a trustee of a trust in which a Reporting Company is held may exercise substantial control over the Reporting Company through a number of means (including, for example, as Manager of a limited liability company or representation on the Board of Directors of a corporation).  It is also possible for settlors and beneficiaries to constitute Beneficial Owners.

5. Additional Resources and Limitations.

Additional information regarding Beneficial Owner reporting requirements may be found at www.fincen.gov/boi.

This document contains only a high-level summary of certain aspects of the Beneficial Owner reporting requirements as of September 5, 2024, based on information and resources published by FinCEN as of that date, and is not intended to be all-inclusive or otherwise serve as your sole source of information regarding the reporting requirements.  In addition, the information in this document may not be construed or relied upon as legal opinion or advice.  Instead, this document is intended for general educational and informational purposes only, and you are urged to consult with an attorney licensed to practice in your state regarding your specific questions and circumstances.

1  A company formed outside the United States may be required to file BOI Reports if it has registered to do business in any U.S. State or Tribal jurisdiction by the filing of a document with a secretary of state or similar office under the law of a State or Indian tribe.

2 In general, “full-time employee” means an employee working an average of at least 30 hours per week.

3 “Operating presence at a physical office within the United States” means the entity regularly conducts its business at a physical location in the United States that is owned or leased by the entity and is physically distinct from the place of business of any other unaffiliated entity.

4 If the entity is part of an affiliated group of corporations within the meaning of 26 U.S.C. 1504, refer to the consolidated return for such group.

5 “Foreign person” means a person who is not a United States person. A “United States person” is defined in section 7701(a)(30) of the Internal Revenue Code of 1986 as a citizen or resident of the United States, domestic partnership and corporation, and other estates and trusts.

6 Generally speaking, some examples of persons with substantial control would include senior officers (including Managers of limited liability companies), persons with the authority to appoint or remove senior officers or a majority of the governing body, and persons with significant influence over important decisions.