Corporate Transparency Act – Reporting Requirements for Companies

By: Anne E. Nye

In 2021, Congress passed the Corporate Transparency Act as a part of the National Defense Authorization Act, which gave rise to a reporting requirement wherein, as of January 1, 2024, certain entities must report information about their beneficial owners – the individual who ultimately own or control the company – to the Financial Crimes Enforcement Network, part of the U.S. Department of Treasury (“FinCEN”). The availability of the reported information will be limited to Federal, State, local and Tribal officials and certain foreign officials who submit a request through United States government.

Companies created on or before January 1, 2024, have until January 1, 2025. Companies created after January 1, 2024, will have ninety (90) calendar days to file after their creation is effective. Companies created after January 1, 2025, will have thirty (30) calendar days to file after their creation is effective.

Companies that are required to report are as follows: corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States and foreign entities formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office. There are twenty-three (23) types of entities that are exempt from the reporting requirements which are as follows: securities reporting issuer, governmental authority, bank, credit union, depository institution holding company, money services business, broker or dealer in securities, securities exchange or clearing agency, other exchange act registered entity, investment company or investment adviser, venture capital fund adviser, insurance company, state-licensed insurance producer, commodity exchange act registered entity, accounting firm, public utility, financial market utility, pooled investment vehicle, tax-exempt entity, entity assisting a tax-exempt entity, large operating company, subsidiary of certain exempt entities and inactive entity.

As mentioned above, the information required to be reported is who the beneficial owners of said company are. A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over the reporting company or (2) owns or controls at least 25% of the reporting company’s ownership interests. Substantial control can be exercised in four (4) different ways: (1) the individual is a senior officer; (2) the individual has authority to appoint or remove certain officers or a majority of directors; (3) the individual is an important decision maker; or (4) the individual has any other form of substantial control over the reporting company. An ownership interest is generally an arrangement that establishes ownership rights in the reporting company. Examples include shares of equity, stock, voting rights, ownership of an instrument that can be converted into equity, stock or voting rights, any interest in profits or assets, etc. Please note that lawyers and accountants do not typically qualify beneficial owners in ordinary arms-length advisory services. However, an individual who holds the position of general counsel is a beneficial owner.

Companies formed on or after January 1, 2024, also need to report their company applicants. A company applicant is an individual who directly files the document that creates or registers the company; and if more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing. Once the initial report is filed indicating who the company applicant was, that can never be removed despite a cease in the relationship between company applicant and company.

Company information to be reported is as follows: (1) its legal name; (2) any trade names, doing business as or trading as names; (3) the current street address of its principal place of business; (4) its jurisdiction of formation; and (5) its EIN. The beneficial owner’s information to be reported is as follows: (1) name; (2) date of birth; (3) residential address; and (4) an identifying number from an acceptable identification document such as a passport or driver’s license and the name of the issuing state plus a scanned copy. The company applicant’s information to be reported is as follows: (1) name; (2) date of birth; (3) business address; and (4) an identifying number from an acceptable identification document such as a passport or driver’s license and the name of the issuing state plus a scanned copy.

There is no annual report required, however, if there is any change to the required information about the company or its beneficial owners, an updated report must be filed no later than thirty (30) days after the date of change.

Entities affected by this new legislation are advised to promptly file their company information, beneficial owner information and any additional information required by FinCEN on FinCEN’s website. Gfeller Laurie, LLP’s Banking and Commercial Law practice group’s attorneys are well-versed in various aspects of business, banking and commercial formation and transactions, with a combined 117 years of experience and would be happy to advise you on the filing requirements.

FinCEN continues to publish additional proposed rulemaking and guidance. Companies are encouraged to check FinCEN’s website here for up-to-date information.