Corporate Transparency Act (CTA)

Corporate transparency shows how the entity’s actions and operations are observed by outsiders or those who aren’t directly linked to the company. The “transparency” factor is shaped by different factors, such as regulations, jurisdictional norms, internal policies on information sharing, and overall decision-making of the entity. In general, being transparent should mean that all staff members, shareholders, and the public can access relevant information about the entity. 

The BOI Report, or the Beneficial Ownership Information Report, consists of data that helps identify who owns or controls certain companies operating in the US. The process involves submitting data and filling out a special form electronically through FinCEN’s system. By reporting BOI, companies aim to prevent money laundering and other criminal activities and, in other words, promote transparent business practices. 

Entities must update FinCEN within 30 days of any changes to their BOI report, such as updates to owners’ personal details, changes in ownership percentages, or shifts in management roles. Additionally, an annual report must be filed to confirm the accuracy of the previously reported information.

Under the CTA, LLCs and corporations must file beneficial ownership information unless they are exempt. Sole proprietorships don’t need to file BOI, and other exclusions are applied. For example, large operating companies with over 20 full-time employees and more than $5 million in gross sales are exempt from this rule. You can check the full list here. 

A reporting company is an entity that is required to report beneficial ownership information and comply with the CTA. 

Examples of such companies include:

• Banks and credit unions
• Bank or savings and loan holding companies
• Brokers or dealers in securities
• Insurance companies
• Public utilities (telecom, electricity, gas, water)
• Securities exchanges or clearing agencies
• Government entities or subdivisions
• Registered money transfer businesses
• Registered investment companies or advisers
• Public accounting firms
• Financial market utilities
• Pooled investment vehicles managed by registered entities
• Tax-exempt entities like charities and political organizations

BOI reports are submitted electronically via FinCEN’s website, which provides a confirmation upon successful filing. An employee, owner, or third-party service provider is authorized to file a BOI report on the company’s behalf. 

Yes. The CTA reporting requirements apply not only to US-based domestic entities but also to foreign entities that are registered to do business in the US. This includes examples like companies and US subsidiaries or affiliates of foreign private companies, whether or not they do business in the US. 

FinCEN states that the Beneficial Ownership Reporting law introduces new requirements that are vital to help entities prevent illicit activities like money laundering through shell companies and concealing true company owners’ identities. 

Previously, corporate compliance left regulatory loopholes that were used by criminals to hide illicit funds and launder such money without getting caught using different company structures and names. That’s why accurate beneficial ownership data makes it harder for criminals to hide behind unclear ownership structures. 

The deadlines for reporting BOI vary:

• Companies created or registered before January 1, 2024, must file their initial BOI reports by January 1, 2025.
• Companies created or registered between January 1, 2024, and January 1, 2025, must file their initial reports within 90 days of creation.
• Companies created or registered on or after January 1, 2025, have 30 days from their registration date to file their initial reports.