The Corporate Transparency Act Explained: Is Your Company Required to Report?

23rd January 2024

In 2021, Congress passed the Corporate Transparency Act (CTA) which obliges reporting companies to submit a Beneficial Ownership Information Report (BOI Report) to the Financial Crimes Enforcement Network (FinCEN). The goal of the new requirement is to limit an individual’s ability to mask or benefit from their gains through shell companies or other ownership structures.  

Key Dates for BOI:

FinCEN began accepting BOI Reports on January 1, 2024, but the first deadline is not until January 1, 2025 for companies that were created or registered before January 1, 2024. For newer companies, specifically those that are created or registered after January 1, 2024, they will have 90 days after receiving notice of their creation or registration to file their reports. Companies created or registered on or after January 1, 2025 will have 30 days to report after receiving notice of their registration or creation.  

Information Included in the BOI Report:

The BOI Report includes a variety of information about company applicants and beneficial owners, including names, addresses, and contact information. While the BOI Report itself is not very onerous, determining whether your company qualifies for the reporting requirements can be a challenge, especially for companies domiciled outside the United States but authorized to conduct business in the United States. Unless an exemption applies, reporting companies include a corporation, an LLC, or a company that was otherwise created in the United States by filing a document with a secretary of state or any similar office, or a foreign company that is registered to do business in any U.S. state.  

Update Requirements:

In addition to the initial BOI Report, companies are required to update or correct their BOI Reports as necessary. The threshold for needing to update the BOI report is low- if there is any change to the required information the company must file an updated BOI Report within 30 days of the date when the change occurred. The same applies for discovering inaccuracies in the BOI  Report.  

Exemptions to Reporting Requirement:

As mentioned, there are several exemptions from the reporting requirement (23, to be exact). Three that may be pertinent are the exemptions for broker dealers, investment companies or advisers, and for pooled investment vehicles.

  • To qualify for the broker dealer exemption, an entity must be a broker or dealer as defined in the Securities Exchange Act of 1934.  
  • To qualify for the investment company or investment adviser exemption, the entity must be defined as an investment company or an investment adviser and must be registered with the SEC as such. 
  • To qualify for the pooled investment vehicle, an entity must meet two criteria:  
    • Either be a registered investment company under the Investment Company Act of 1940 or be a company that would be an investment company but for qualifying for a Section 3(c)(1) or 3(c)(7) exemption from the registration requirements of the Investment Company Act of 1940; and 
    • Is operated or advised by another exempt entity such as a bank, credit union, Broker or Dealer in securities, investment company or investment adviser, or venture capital adviser. 

Special Rule for Foreign Pooled Investment Vehicles:

Another key point to note is that there is a special rule for foreign pooled investment vehicles. An investment pool formed under the laws of another country but that would otherwise be a reporting company if not for the pooled investment vehicle exemption has limited reporting requirements. These entities need only report on one individual who exercises substantial control over the company.

CTA Compliance and Assistance:

Above all complying with CTA requirements can be intricate, especially for new entities. Our US team is here to help answer your questions, address filing concerns, and ensure a smooth compliance process. Reach out to us for expert guidance and ease your worries about reporting obligations.

Author

Madeline Gegg