Understanding the Corporate Transparency Act (CTA)

What is the CTA?

The Corporate Transparency Act (CTA), which became law on January 1, 2021, represents a significant overhaul in anti-money laundering regulations in the U.S., following the reforms introduced by the U.S. Patriot Act. This new legislation is designed to fight money laundering, terrorism financing, and other illegal activities by requiring certain businesses to report their Beneficial Ownership Information to the Financial Crimes Enforcement Network (FinCEN).

Who Needs to Comply with the CTA?

Entities that must adhere to the CTA, called "Reporting Companies," include corporations, LLCs, and other businesses formed by filing with a state or federal authority. This also includes foreign companies that register to operate in the U.S. through similar filings. However, there are exceptions—such as "large operating companies" and entities already regulated by government bodies.

A "large operating company" is exempt if it:

  • Employs 20+ full-time U.S. employees
  • Reports $5+ million in revenue on its latest tax return
  • Has a physical presence in the U.S.

Who is Considered a Beneficial Owner?

A beneficial owner is anyone who:

  • Owns or controls at least 25% of the company
  • Exercises substantial control over the company, which could include:
    • Serving as a senior officer
    • Influencing major company decisions
    • Controlling financial arrangements or other significant aspects of the business

When Do Reporting Requirements Begin?

The reporting requirements will be phased in over time:

  • New companies formed or registered after January 1, 2024, must report within 90 days.
  • Existing companies formed before January 1, 2024, must report by January 1, 2025.

How to Prepare Your Business for the CTA

If you’re unsure whether your company is subject to CTA requirements, consider these key questions:

  • Is your company exempt, or do you need to report beneficial ownership?
  • Do any of your owners meet the 25% ownership threshold?
  • Who in your organization exercises substantial control under the CTA’s definition?

To stay compliant, companies should create processes for monitoring changes in beneficial ownership and update operative documents to reflect CTA requirements.

What Information is Required in a BOI Report?

For each Reporting Company, the BOI report must include:

  • Company name, trade names, and principal business address
  • Jurisdiction of formation
  • Taxpayer Identification Number (TIN)

Beneficial owners must provide:

  • Legal name and residential address
  • Date of birth
  • ID number from a government-issued ID, along with an image of the document

Penalties for Non-Compliance

Failure to comply with the CTA can result in significant penalties:

  • Civil penalties of up to $591 per day (adjusted for inflation in 2024)
  • Criminal penalties of up to $10,000 and/or imprisonment for up to two years  

How Does My Business File a BOI Report?

Electronic filing system is available here. To access a step by step guide click here.

Need Help with BOI Reporting?

For more details, visit FinCEN’s BOI FAQs page or contact us directly for assistance.