Corporate Transparency Act Reporting from January 1

The Corporate Transparency Act’s reporting requirements come into effect on January 1, 2024. Here’s what you need to know:  

In Case You Missed It: What’s The Corporate Transparency Act? 

Did you know the US is ranked first in the world for financial secrecy? In 2022, it received the highest ever score for financial secrecy (based on the index administered by the Tax Justice Network).  

The Corporate Transparency Act is the US beneficial ownership reporting law. Beneficial ownership reporting laws are rapidly being introduced around the world to shed light on who owns which companies. They are designed to reduce illegal tax evasion, as well as money laundering and the financing of terrorism.   

It is expected that the CTA will increase reporting obligations for 32.6 million entities when it comes into effect. The law will also impact approximately 5 million further entities expected to be created each year from 2024 to 2034.  

Reporting Obligations Under the Corporate Transparency Act 

FinCEN has published a Small Business Guide to the BOI Reporting, which we highly recommend reading. But, in summary:  

Who Must Report? 

Generally, businesses that were created by the filing of a document with the secretary of state or other similar office will fall under the reporting requirements. This includes most corporations and LLCs.  

There are 23 broad exemptions to the reporting requirements, most of which have other reporting requirements. They include many financial and investment vehicle institutions, as well as accounting firms. “Large operating entities”, certain subsidiaries, and inactive entities are also exempt. 

Large operating entities are US-based entities with more than 20 full-time employees who are located in the US. The entity must meet three additional reporting criteria relating to its finances, including a requirement to earn (and report) more than $5 million gross receipts or sales in the previous tax year.  

What Must Be Reported?  

Businesses must disclose information about their ‘beneficial owners’. A beneficial owner is any individual who:  

• Exercises substantial control over a reporting company; or  
• Owns or controls at least 25% of the ownership interests of a reporting company.  

The Small Business Compliance Guide linked above contains a great deal of information about identifying these individuals.  

Companies registered in 2024 will have additional reporting requirements relating to their ‘Company Applicants’.  

The following information will need to be reported:  

Company Information 

• Legal name, and trading name/DBA (if any) 
• Business address. 
• Jurisdiction of formation.  
• Tax ID.  

Beneficial Owner Information 

• Legal name.  
• Birth date.  
• Residential address.  
• ID number and photograph of an approved ID document.  

When Are the Reporting Deadlines?  

FinCEN will start accepting reports on January 1, 2024. Existing companies (that is, companies that were registered prior to January 1, 2024) will have one year to submit their initial reports.  

How Should Companies Report Information About Beneficial Owners? 

This is yet to be determined. However, companies should refer to https://www.fincen.gov/boi to find reporting information closer to the January 1, 2024 effective date for more information.  

If your company needs assistance navigating these new reporting obligations, reach out. Our corporate attorneys would love to help.   

• Corporate Governance