Beneficial Owner Reporting with FinCEN under the Corporate Transparency Act

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Beginning January 1, 2024, all corporations, LLCs, and other entities created in the United States, whether through filing with the secretary of state or a similar office or those created in a foreign country and registered to do business in a state, must file a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN).

The Corporate Transparency Act (CTA)

The Corporate Transparency Act (CTA) is a federal law enacted in 2020 as part of the Anti-Money Laundering Act of 2020. It mandates certain entities to report beneficial ownership information to FinCEN, aiming to combat money laundering, terrorist financing, and other financial crimes.

Under the CTA, a “beneficial owner” is defined as any individual who, directly or indirectly, either exercises substantial control over a reporting company or owns or controls at least 25% of the reporting company’s ownership interests.

Reporting Companies under the CTA

Reporting companies under the CTA encompass all corporations, LLCs, and other entities created in the United States, as well as foreign entities registered to do business in the United States. Exceptions to reporting requirements exist, such as for publicly traded companies and certain financial institutions.

Reporting companies must provide FinCEN with the following information about their beneficial owners:

  • Full legal name
  • Date of birth
  • Residential address
  • Identifying numbers and issuing jurisdiction from a driver’s license, passport, or other authorized document
  • Image of the document the number is from


Reporting companies must file an initial report with FinCEN on or after January 1, 2024, and on or before January 1, 2025. Reporting companies must also file an updated report within 30 days of any changes to their beneficial ownership information.

The CTA’s beneficial ownership reporting requirements are a significant new compliance burden for businesses. However, the CTA is an important tool in the fight against financial crime, and businesses should take steps to ensure that they are compliant with the new law.

Here are some additional details about the CTA's beneficial ownership reporting requirements:

What is considered substantial control?

An individual exercises substantial control over a reporting company if they have the ability to direct, determine, or substantially influence important decisions made by the company. This includes decisions about the company’s business strategy, investments, and financial operations.

What is considered ownership interest?

Ownership interests include things like stock, equity, and membership interests in a company. Ownership interests can be held directly or indirectly, through other entities or arrangements.

Who is not considered a beneficial owner?

The CTA exempts certain individuals from being considered beneficial owners, including:

  • Minor children
  • Individuals acting as nominees or intermediaries on behalf of another individual
  • Employees of a reporting company whose substantial control over or economic benefits from the entity are derived solely from their employment status
  • Individuals whose only interest is a future interest through a right of inheritance
  • Creditors of a reporting company

What are the penalties for failing to comply with the CTA's reporting requirements?

Businesses that fail to comply with the CTA’s reporting requirements may be subject to civil and criminal penalties. Civil penalties can range up to $500,000 per violation, and criminal penalties can include up to five years in prison.

The importance of beneficial ownership transparency

Beneficial ownership transparency is important for a number of reasons. It helps to:

Combat money laundering and terrorist financing by making it more difficult for criminals to hide their identities and assets

Deter corporate fraud and other financial crimes by increasing the risk of detection

Promote accountability and good governance in businesses

Protect consumers and investors from fraud and other abuses

The CTA’s beneficial ownership reporting requirements are a significant step forward in improving beneficial ownership transparency in the United States. By complying with the CTA, businesses can help to make the financial system more secure and protect the public from financial crimes.


The CTA is a new law that requires businesses to report information about their beneficial owners to the FinCEN. This is an important step in combating financial crime and promoting transparency in the business community. Businesses should take steps to understand who their beneficial owners are and to comply with the new reporting requirements. Failure to do so could result in civil or criminal penalties.

To learn more about how you can comply with CTA, contact us today to schedule a consultation.

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