Corporate Transparency Act Overview
The Corporate Transparency Act (CTA), enacted in 2021, represents the most significant change to U.S. corporate formation and reporting requirements in decades. The law requires most U.S. companies to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).
The primary goal is to combat money laundering, tax fraud, terrorist financing, and other illicit activities by creating a federal database of company ownership information.
⚠ Compliance Mandatory
Non-compliance with BOI reporting requirements can result in civil penalties up to $500 per day and criminal penalties including fines up to $10,000 and/or imprisonment up to 2 years.
Who Must File BOI Reports?
The CTA applies to reporting companies, which include two categories:
Domestic Reporting Companies
- Corporations
- Limited Liability Companies (LLCs)
- Any entity created by filing a document with a secretary of state or similar office
Foreign Reporting Companies
- Foreign entities registered to do business in the United States
- Foreign entities that filed documents with a secretary of state or similar office to register
Do You Need to File a BOI Report?
If NO → You likely don't need to file
If YES → Continue to Step 2
If YES → You don't need to file
If NO → Continue to Step 3
• Before January 1, 2024 → Deadline was January 1, 2025
• On or after January 1, 2024 → 90 days from formation (or 30 days if formed after 2024)
Beneficial Owner Definition
A beneficial owner is any individual who, directly or indirectly:
Ownership Test (25% Threshold)
Exercises substantial control over the reporting company OR owns or controls at least 25% of the ownership interests of the reporting company.
💡 Key Points About the 25% Threshold
Direct or Indirect Ownership: The 25% can be held directly or indirectly through other entities, arrangements, or any other means.
Aggregation: Multiple small ownership interests that together equal 25% or more must be counted.
Future Interests: Options, convertible instruments, and other arrangements that could result in 25% ownership may need to be considered.
Substantial Control Test
An individual exercises substantial control if they:
- Serve as a senior officer (CEO, CFO, COO, General Counsel, or equivalent)
- Have authority to appoint or remove senior officers or a majority of the board
- Direct, determine, or have substantial influence over important decisions, including:
- Business nature, scope, and attributes
- Major expenditures or investments
- Issuance of equity
- Incurrence of significant debt
- Approval of operating budgets
- Compensation schemes for senior officers
- Entry into or termination of significant contracts
- Amendments to governance documents
- Have any other form of substantial control over the reporting company
⚠ Multiple Beneficial Owners Possible
Most companies will have multiple beneficial owners. You must report ALL individuals who meet either the ownership or substantial control test.
Company Applicant Requirements
For companies created or registered on or after January 1, 2024, you must also report company applicants.
Who Are Company Applicants?
There are two types of company applicants (maximum of 2 individuals total):
- Direct Filer: The individual who directly files the document that creates or registers the company
- Responsible Person: The individual who is primarily responsible for directing or controlling the filing
💡 Company Applicant Exemption
Companies formed BEFORE January 1, 2024, do NOT need to report company applicants - only beneficial owners.
Required Information to Report
Information Required for Each Beneficial Owner & Company Applicant:
Information Required About the Reporting Company:
Initial, Updated, & Corrected Reports
Initial Reports
Every reporting company must file an initial BOI report containing all required information about the company, its beneficial owners, and (if applicable) its company applicants.
Updated Reports
If ANY information in a previously filed BOI report changes, you must file an updated report within 30 days of the change.
Changes requiring an update include:
- Change in beneficial ownership (new owners, ownership percentage changes above/below 25%)
- Change in beneficial owner information (name, address, ID document)
- Change in company information (name, address, jurisdiction)
- Change in company applicant information (only for corrections, as applicants cannot "change")
Corrected Reports
If you discover inaccurate information in a previously filed report, you must file a corrected report within 30 days of discovering the inaccuracy.
⚠ 30-Day Deadline Applies
Both updated and corrected reports must be filed within 30 days. There are no extensions available.
Filing Deadlines (2024+ Timeline)
| Company Formation Date | Initial Report Deadline |
|---|---|
| Created before January 1, 2024 | January 1, 2025 |
| Created January 1, 2024 - December 31, 2024 | 90 days after formation/registration |
| Created on or after January 1, 2025 | 30 days after formation/registration |
| Ongoing Requirements | |
| Updated reports (any changes) | 30 days after the change |
| Corrected reports (inaccuracies discovered) | 30 days after discovery |
⚠ Critical 2025 Deadline Passed
If your company was formed before 2024 and you have not yet filed, you are already past the January 1, 2025 deadline. File immediately to minimize penalties.
Exemptions from BOI Reporting
The CTA provides 23 categories of exemptions. Companies that qualify for an exemption do NOT need to file BOI reports.
| Exemption Category | Description |
|---|---|
| Securities Reporting Issuers | Public companies required to file reports with the SEC under Section 13 or 15(d) of the Securities Exchange Act |
| Governmental Authorities | Government entities at federal, state, local, or tribal level |
| Banks | Institutions defined as "bank" under various banking laws |
| Credit Unions | Federal or state credit unions |
| Depository Institution Holding Companies | Bank holding companies and savings and loan holding companies |
| Money Services Businesses | Entities registered with FinCEN as MSBs |
| Broker-Dealers | Registered broker-dealers under the Securities Exchange Act |
| SEC-Registered Entities | Investment companies, investment advisers, and venture capital fund advisers registered with the SEC |
| Insurance Companies | State-licensed insurance companies |
| Public Utilities | Entities providing telecommunications, electric, gas, or water utilities |
| Tax-Exempt Entities | 501(c) organizations and other tax-exempt entities |
| Large Operating Companies | Companies with: (1) 20+ full-time employees in the U.S., (2) $5M+ in gross receipts or sales (U.S. sourced), and (3) physical office in the U.S. |
| Subsidiaries of Exempt Entities | Entities wholly owned or controlled by certain exempt entities |
| Inactive Entities | Entities meeting specific criteria for being inactive (formed before 2020, no assets, no business activity, etc.) |
💡 Large Operating Company Exemption
This is the most commonly applicable exemption for established businesses. ALL THREE requirements must be met: (1) 20+ full-time U.S. employees, (2) $5M+ in U.S.-sourced gross receipts, AND (3) a physical office in the U.S.
FinCEN Identifier System
To streamline reporting, individuals and reporting companies can obtain a FinCEN Identifier - a unique identifying number issued by FinCEN.
Benefits of a FinCEN ID
- Privacy: Instead of repeatedly submitting personal information, you provide only your FinCEN ID
- Efficiency: Update your information once with FinCEN, rather than filing updated reports for every company
- Centralized Updates: When your information changes (new address, renewed ID), update it once through FinCEN
How It Works
- Apply for FinCEN ID: Submit your personal information directly to FinCEN through the BOI E-Filing system
- Receive FinCEN ID: FinCEN issues a unique identifying number
- Use in BOI Reports: When filing BOI reports, provide your FinCEN ID instead of repeating all personal information
- Update Centrally: If your information changes, update it once with FinCEN rather than filing updated reports for each company
✓ Recommended for Most Beneficial Owners
If you're a beneficial owner of multiple entities, getting a FinCEN ID can significantly reduce administrative burden and protect your privacy.
Penalties for Non-Compliance
The CTA imposes significant penalties for willful violations:
Civil Penalties
- Up to $500 per day for each day the violation continues
- Penalties can accumulate quickly - a 6-month delay could result in $90,000+ in fines
Criminal Penalties
- Fines up to $10,000
- Imprisonment for up to 2 years
- Or both
What Constitutes a Violation?
- Willfully failing to file a required BOI report
- Willfully filing false or fraudulent information
- Willfully failing to correct inaccurate information
- Willfully failing to update changed information
- Unauthorized disclosure or use of BOI information
⚠ Personal Liability
Individuals who cause a reporting company's failure to comply - including senior officers - can be held personally liable for penalties, even if they are not beneficial owners themselves.
How to File
BOI reports must be filed electronically through FinCEN's BOI E-Filing System.
Step-by-Step Process
- Gather Required Information: Collect all necessary information about the company, beneficial owners, and (if applicable) company applicants
- Obtain ID Documents: Ensure you have acceptable identification documents for all individuals (passport, driver's license, or state/tribal ID)
- Create Digital Copies: Scan or photograph ID documents in an acceptable format (PDF or image)
- Access BOI E-Filing: Visit https://boiefiling.fincen.gov
- Complete the Form: Fill out the electronic form with all required information
- Upload Documents: Attach ID document images for all individuals
- Review and Submit: Carefully review all information before submitting
- Receive Confirmation: FinCEN will provide a confirmation upon successful filing
💡 No Filing Fee
There is no fee to file BOI reports with FinCEN. Beware of third-party services charging excessive fees for basic filing assistance.
Next Steps
- Determine if your company is a reporting company or qualifies for an exemption
- Identify all beneficial owners (25% ownership OR substantial control)
- Identify company applicants (if formed on or after January 1, 2024)
- Gather required information and documents for all individuals
- Consider obtaining FinCEN IDs for beneficial owners with interests in multiple entities
- File your BOI report through FinCEN's BOI E-Filing System
- Establish ongoing compliance procedures to ensure timely filing of updated/corrected reports
- Consult with counsel if you have questions about complex ownership structures or exemptions