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Corporate Transparency Act

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The Corporate Transparency Act (CTA) legislation introduces beneficial ownership reporting requirements for new and existing companies and goes into effect on January 1, 2024. Unless exempt, newly formed companies have to report required information to the United States Department of Treasury Financial Crimes Enforcement Network (FinCEN) within 90 days of formation. Reporting companies already in existence prior to January 1, 2024 will have until January 1, 2025.


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About the Corporate Transparency Act

Determine if your company is required to file a beneficial ownership report with FinCEN.

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Originally enacted in January 2021 as part of the 2021 National Defense Authorization Act, the CTA seeks to protect national interests and prevent "malign actors" from concealing their ownership of corporations, limited liability companies (LLCs), or similar entities in the United States to engage in illicit activity. The CTA requires corporations, LLCs, or similar entities that fall under the definition of a "reporting company" to submit a filing to FinCEN containing information regarding the individuals who directly or indirectly own or control a company.

FinCEN began accepting beneficial ownership information reports on January 1, 2024 electronically through a secure filing system available via FinCEN's website.

Companies required to report are called reporting companies. There are two types of reporting companies:

  • Domestic reporting companies are corporations, LLCs, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.

  • Foreign reporting companies are entities (including corporations and LLCs) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.

There are 23 types of entities that are exempt from the reporting requirements. These entities include publicly traded companies meeting specified requirements, many nonprofits, and certain large operating companies.

There are 23 types of entities that are exempt from the reporting requirements:

  • Securities reporting issuer

  • Government authorities

  • Banks

  • Credit unions

  • Depository institution holding companies

  • Money services businesses

  • Brokers or dealers in securities

  • Securities exchange or clearing agencies

  • Other Exchange Act registered entities

  • Investment companies or investment advisers

  • Venture capital fund advisers

  • Insurance companies

  • State-licensed insurance producers

  • Commodity Exchange Act registered entities

  • Accounting firms

  • Public utilities

  • Financial market utilities

  • Pooled investment vehicles

  • Tax-exempt entities

  • Entities assisting a tax-exempt entity

  • Large operating companies

  • Subsidiaries of certain exempt entities

  • Inactive entities

Reporting company

  • Any domestic corporation, LLC, or similar entity.

  • Any foreign company that registers to do business in the U.S.

Numerous exceptions apply for companies already regulated at the federal or state level and for large companies with a U.S. operating location.

Beneficial owner

  • 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.

25% ownership

  • CTA did not define what constitutes ownership or how to calculate 25%, but a suggested approach is to aggregate all the individual's ownership interests of any class or type that the individual owns or controls and compare the aggregated interest to the undiluted ownership interests of the company.

Substantial control

The CTA does not define what constitutes substantial control over the entity. Substantial control can include:

  • Service as a senior officer of the reporting company.

  • Authority over the appointment or removal of any senior officer, majority, or dominant minority of the board of directors.

  • Direction, determination, decision, or substantial influence over important matters affecting the reporting company.

  • Any other form of substantial control over the reporting company.

  • Substantial control may be exercised directly or indirectly.

  • More than one person may exercise substantial control.

  • Not intended to include ordinary daily managerial decisions.

Company applicant

Only reporting companies created or registered on or after January 1, 2024, will need to report their company applicants.

A company that must report its company applicants will have only up to two individuals who could qualify as company applicants:

  • The individual who directly files the document that creates or registers the company.

  • And, if more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing.


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