A new federal law called the Corporate Transparency Act ("CTA") requires virtually every business entity to file a report with the federal government to avoid criminal and civil penalties.

The reporting requirements of the CTA went into effect on January 1, 2024. Every business entity ("Reporting Company") must report certain information about the business and its owners to the U.S. Treasury’s Financial Crimes Enforcement Network ("FinCEN"). This report is called a beneficial ownership information report ("BOI Report").

Entities that are required to file BOI Reports are called Reporting Companies. A Reporting Company is any entity created by filing a document with a secretary of state or similar state office. Reporting Companies would include LLCs, corporations, and limited partnerships.

Sole proprietorships and trusts are not considered Reporting Companies and, therefore, are not subject to the reporting requirements of the CTA. Additionally, 23 types of businesses are exempt from the CTA’s reporting requirements.

No, inactive entities are exempt from the CTA’s reporting requirements. To be considered an inactive entity, the business must meet six criteria: (1) formed before 2020; (2) not engaged in active business; (3) not owned by a foreign person; (4) no ownership changes in the last 12 months; (5) not sent or received more than $1,000 in the last 12 months; (6) does not hold any assets (including an interest in another entity).

If your business is a Reporting Company, you must report certain information about the business, each beneficial owner, and the company applicant (if the business was formed after 2024). These reports are called beneficial owner information reports ("BOI Reports")

Reporting Company. A Reporting Company must report its legal name, any trade names, the current street address of its principal place of business or, for Reporting Companies whose principal place of business is outside the United States, the current address from which the Reporting Company conducts business in the United States, its jurisdiction of formation or registration, and its Taxpayer ID (aka EIN).

Beneficial Owners. For each Beneficial Owner, the Reporting Company must report the individual’s name, date of birth, residential address, and an image of each beneficial owner’s driver’s license or passport. A beneficial owner is an individual who either directly or indirectly: (1) exercises “substantial control” over the Reporting Company, or (2) owns or controls at least 25% of the Reporting Company’s ownership interests. The following individuals exercise “substantial control” over a Reporting Company: (a) senior officers, (b) anyone who can appoint or remove officers, and (c) important decision-makers.

If a trust owns a Reporting Company, the following individuals would exercise substantial control over the Reporting Company: a trustee; a beneficiary who is the sole permissible recipient of trust income; a principal who has the right to demand a distribution of or withdrawal of all, or substantially all, of the trust assets; a grantor who has the right to revoke or otherwise withdrawal trust assets.

Company Applicant. For businesses formed on or after January 1, 2024, the Reporting Company must report the company applicant’s name, date of birth, address, and a copy of their driver’s license or passport. If the company applicant has a FinCEN Identifier, you may report the FinCEN Identifier instead of this information. The company applicant is the individual who directly files the document that creates or registers the Reporting Company.

The initial report is due thirty (30) days after the date of formation. For entities formed before 2024, the initial report is due by January 1, 2025. For entities formed in 2024, the deadline has been increased to ninety (90) days after the date of formation.

In addition to the initial BOI Report described above, Reporting Companies are obliged to report any changes in the information reported to FinCEN within thirty (30) days of such change.

Failure to comply with the CTA will result in civil fines of up to $500 per day for as long as the reporting violation continues, along with criminal penalties of up to $10,000 and imprisonment for up to two years.