In 2021, Congress enacted the Corporate Transparency Act (CTA). In an effort to curb financial crimes, the CTA included a new federal reporting requirement for beneficial ownership information (BOI). The law requires many companies doing business in the United States to report who owns or controls the company.
Who has to report?
Companies required to report under these rules are called “reporting companies”. There are two broad categories of reporting companies under the CTA. The first category are companies created in the United States by filing a document with a secretary of state or a similar office under the law of a state or Indian tribe. This category includes LLCs and corporations. The second, are foreign companies registered to do business in any U.S. state or Indian tribe by a filing.
There are twenty-three types of entities that are exempt from BOI reporting requirements. These include publicly traded companies, nonprofits, and certain large operating companies. There is also an exemption for inactive entities. To be an inactive entity you must have created the company before January 1, 2020. The company also must not have changed ownership in the last year or hold any assets, among other requirements.
Fortunately for us (and for many of you) most trusts and estates do not have to report. However, a trustee or trust may exercise substantial control over a reporting company.
What do I report?
Beneficial ownership reports include information about the entity itself as well as information about beneficial owners and company applicants. Generally, a beneficial owner is defined as anyone who owns at least 25% of a company or has substantial control over the company. A company applicant is an individual who directly files or is primarily responsible for the filing of the document that creates or registers the company. But, depending on when you created your company, you may not need to report information about company applicants. If you have lost track of these people, you may want to start looking, as the form requires their full name, date of birth, address, and an identifying document image.
When do I report?
FinCEN began accepting reports on January 1, 2024. Reporting companies have different BOI reporting deadlines depending on when you created the company. If you created or registered your company prior to 2024 you have until January 1, 2025 to report. If you created your company in 2024, you must submit your BOI within ninety days after receiving notice that your company’s creation or registration is effective. Or, if you created or registered your company on or after January 1, 2025, you must file BOI report within thirty days.
If you report and then the provided information changes, you have thirty days from the date of the change to report it.
How do I report?
You can fill out your BOI report online through the FinCEN website. They offer the report in a fillable PDF format, or you can fill out the form directly through their website.
Is this legislation unconstitutional?
The CTA may be found unconstitutional. On March 1st, a Federal District Court entered a declaratory judgment concluding that the CTA exceeds the Constitutions limits on Congressional Power. The Justice Department filed a notice of appeal on March 11. But, while we wait to hear on the appeal, reporting companies are still required to file BOI reports.
