Comply with the Corporate Transparency Act and Beneficial Ownership requirements

The Corporate Transparency Act is a law that’ll require millions of the nation’s smallest business entities to report beneficial owner information (BOI) to the Financial Crimes Enforcement Network (FinCEN) starting in 2024. (FinCEN is a bureau of the U.S. Department of the Treasury.)

The law was enacted because “illicit actors” often set up small LLCs and corporations as shell companies, or fronts, to hide the identities of owners who are engaged in money laundering, financing terrorism, and other illegal activities.

According to FinCEN, the term beneficial owner includes any individual who, directly or indirectly, either

• Exercises substantial control over a reporting company (meaning they can make important decisions for the company)

or

• owns or controls at least 25 percent of the ownership interests

According to FinCEN, an individual can exercise substantial control over a reporting company in four different ways. If the individual falls into any of the categories below, the individual is exercising substantial control:

• The individual is a senior officer (the company’s president, chief financial officer, general counsel, chief executive officer, chief operating officer, or any other officer who performs a similar function).
• The individual has authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company.
• The individual is an important decision-maker for the reporting company. See Question D.3 for more information.
• The individual has any other form of substantial control over the reporting company, as explained further in FinCEN’s Small Entity Compliance Guide (see Chapter 2.1, “What is substantial control?”).

Small businesses that match these criteria will be required to file BOI reports:

• Have 20 or fewer full-time employees and less than $5 million in sales

and

• Are LLCs, limited liability partnerships, corporations, business trusts, or other entities created by filing with a Secretary of State, tribal jurisdiction, or similar office
• Foreign LLCs and corporations that are registered to do business in any state or tribal jurisdiction

Organizations with more than 20 full-time employees and over $5 million in annual gross receipts are excluded from reporting requirements.

The regulations went into effect on January 1, 2024. Companies that were created or registered before January 1, 2024, will have one year (until January 1, 2025) to file their initial reports. Companies created or registered after January 1, 2024, will have 90 days after creation or registration to file their initial reports.

If there’s a change in beneficial owner information after the initial report is filed, a company will have to file an update within 30 days of the change.

No. The BOI reports are made to the US federal government through FinCEN in an effort to fight financial crimes. Information reported that is not already public will not become public by completing the mandatory BOI report.

When there’s a change to your business or beneficial ownership information, you’re required to update FinCEN within 30 days of the change. Examples of a change include:
-The business address changes
-A beneficial owner moves and changes their address
-A beneficial owner gets married and changes their name
-A beneficial owner’s passport or driver’s license needs to be renewed
-A beneficial owner was previously a minor and comes of age

Additional Resources:

FinCEN BOI FAQ: https://www.fincen.gov/boi-faqs

Compliance Guide: https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide_FINAL_Sept_508C.pdf


FinCEN FAQ: https://www.fincen.gov/boi-faqs#M_3

FinCEN Beneficial Ownership Guide link:
https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf