Any US corporation, LLC, or similar entity that was formed by filing a document with the secretary of state or similar agency in the state of formation, or formed in a foreign jurisdiction and registered to do business in the US, must report annually to FinCEN.
The Corporate Transparency Act (CTA) was passed by Congress as part of the National Defense Authorization Act for Fiscal Year 2021. Through the act, all US businesses are required to report information to the Financial Crimes Enforcement Network (FinCEN). The CTA was developed as an anti-money laundering measure, and information collected will only be used for law enforcement and security purposes. It will not be made available to the public or subject to Freedom of Information Act (FOIA) Requests.
There are some exemptions to the reporting requirements. Large companies with at least 20 employees and revenue for the preceding year over $5 million are not required to report. Some entities that are already regulated, such as banks, are also exempt.
Companies are required to report the name of the entity and trade or dba names, jurisdiction of formation, identifying number (EIN or TIN), physical address of principal place of business, and beneficial owners (full name, DOB, address, identification number). Reports must be refiled annually and updated within thirty (30) days of any changes to the reported information.
A Beneficial Owner is anyone who controls at least 25% of the ownership interests of the reporting company. Anyone who can exercise substantial direct or indirect control over the company, make key decisions, or select company officers is also considered a Beneficial Owner. Each Beneficial Owner’s full legal name, date of birth, current residential or business address, and unique identifying number or FinCEN identifier should be included in the report.
Beneficial Owner information does not need to be reported for: a minor child, if the child’s parent’s or guardian’s information is otherwise reported properly; an individual acting as a nominee, intermediary, custodian, or agent on behalf of another individual; an individual acting as an employee whose control is derived solely because of employment status; an individual whose only interest in the entity is through a right of inheritance; and a creditor of the entity, unless the creditor meets the requirements of a Beneficial Owner.
For companies formed after January 1, 2024, the report to FinCEN must also include ID information on the company applicant. The Company Applicant is the individual who files the application to form the entity. The Company Applicant for a foreign entity is the individual who registers or files an application for the foreign entity to do business in the United States.
The CTA becomes effective on January 1, 2024, and all required reports by entities in existence before 2024 must be filed by January 1, 2025. Entities formed after January 1, 2024, must file necessary reports at the time of formation. FinCEN will collect reports through an online portal beginning January 1, 2024.
In summary, reporting entities existing before 2024 must file a report with FinCEN including company and Beneficial Owner information before January 1, 2025. Companies formed after January 1, 2024, must file a report with FinCEN including company, Company Applicant, and Beneficial Owner information. All reporting entities must refile the report annually and update the report within thirty (30) days of any changes.