The Basics of This New Reporting Requirement

The Corporate Transparency Act was passed by Congress with bipartisan support in 2021 and went into effect on January 1, 2024. Broadly speaking, the law requires private companies to file a report with the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) disclosing information about who their “beneficial owners” are.

But, as with many laws, that brief description poses more questions than it answers. Do all private companies have to comply with the Corporate Transparency Act? What must be disclosed in a beneficial ownership information (BOI) report, and when must the report be filed? What makes someone a beneficial owner?

We’ll answer those questions and more in this three-part blog series. This post sets the stage with some background information and basic definitions. In part two, we’ll take a closer look at who the Corporate Transparency Act applies to, examining terms such as “reporting companies” and “beneficial owners” and reviewing the exemptions and exceptions that the law carves out. In part three, we’ll lay out the essential steps for complying with the Corporate Transparency Act, such as determining your filing deadline, identifying beneficial owners, filing a BOI report, and updating BOI reports, along with the penalties for noncompliance.

An overview of the Corporate Transparency Act and why it was created

Across most of the United States, businesses do not have to disclose information about their owners when they file their initial registration documents.

In effect, then, individuals and other businesses have been able to operate in the shadows, controlling businesses anonymously. While this has allowed owners to protect their privacy and avoid public judgment, it has also prevented law enforcement scrutiny. That left an opening for illegal activities, making it easier to hide or launder money involved in terrorism, piracy, tax evasion, securities fraud, and other criminal schemes, damaging the U.S. economy and threatening national security.

In 2019, the Corporate Transparency Act was introduced in Congress to cut off that opening and provide a mechanism for government oversight by creating transparency in corporate ownership.

What must reporting companies include in a beneficial ownership information (BOI) report?

The Corporate Transparency Act requires each reporting company to submit a beneficial ownership information (BOI) report that discloses who owns the company and provides details about those owners. New companies must also provide detailed information about the company applicant who filed the initial formation or registration documents.

A reporting company must include information about itself in its BOI report, such as the following:

• The business’s full legal name, including any trade names or “doing business as” names
• Its primary address or, for foreign companies, the address of its U.S. headquarters
• For domestic companies, the jurisdiction in which the business was formed
• For foreign entities, the jurisdiction in which the business was registered
• The business’s Taxpayer Identification Number (TIN) or equivalent information for a foreign business

Additionally, a BOI report must — as the name indicates — provide information about the business’s beneficial owner(s), such as their name, date of birth, address, and a unique identifying number such as a driver’s license or passport number, accompanied by an image of the identification document that includes that number.

Existing businesses can stop there. However, businesses formed or registered after January 1, 2024, must also include detailed information about the “company applicant,” the person or persons who filed the business’s initial formation documents.

We’ll cover reporting requirements in more detail in part three.

Who can access information in BOI reports?

Since the Corporate Transparency Act was created to enable law enforcement investigations and improve government oversight, only governmental actors can access information submitted in BOI reports. FinCEN notes that it will release information to officials from federal, state, local, and tribal governments and to “certain foreign officials” provided that they submit an appropriate request. Financial institutions may also have access to the information in BOI reports, but only with the consent of the reporting company. Any financial regulators that oversee those institutions will also be privy to that information.

FinCEN is required to store BOI information in a secure, confidential database protected by stringent information security protocols.

How urgent is Corporate Transparency Act compliance for your business? Let’s finish our review of the basics by considering when the Corporate Transparency Act goes into effect and when businesses must file BOI reports.

What’s the effective date of the Corporate Transparency Act? How long do businesses have to file a BOI report?

The Corporate Transparency Act became effective on January 1, 2024. But reporting companies that already existed before that date have some breathing room before their BOI report is due: the compliance deadline for existing businesses is January 1, 2025.

Newly formed or registered businesses don’t get that luxury. Reporting companies that are formed or registered in 2024 must file their BOI reports within 90 days of receiving actual or public notice that their formation or registration is effective (“Notice of Formation”). FinCEN amended the reporting rule to extend the original 30-day deadline to 90 days to give businesses time to understand their new obligations.

The timeline will grow even tighter next year. As of January 1, 2025, newly created or registered reporting companies have only 30 days from their Notice of Formation to file their BOI reports.

Need help determining whether the Corporate Transparency Act applies to your business?

For more information, check out our comprehensive blog on the requirements of the Corporate Transparency Act. In upcoming blogs, we’ll provide more detailed information on who the Corporate Transparency Act applies to and what it requires.

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