Corporate Transparency Act Imposes New Reporting Requirements

What is the Corporate Transparency Act?

The Corporate Transparency Act (“CTA”) is a new federal law that is designed to create a national database of any entity (corporation, limited liability company, etc.) that is created in any state in the US.  The goal is for the US Government to have one central database, where they can identify the true individuals that own and control each entity. The purpose is to assist the Government to combat money-laundering, terrorism, tax evasion and other financial crimes by allowing the Government to actually see which individuals own and control each layer of an entity structure.

Under the CTA, any business entity will be required to file a Beneficial Ownership Report (“Report“) with the Financial Crimes Enforcement Network of the Department of Treasury (“FinCEN”).

The portal to create a FinCEN registration number and file the Report is supposed to go live January 1, 2024 and will be available via this link.

Who Has to File an Initial Report?

Any entity that is formed by filing paperwork with the relevant Secretary of State or similar government organization will be considered a “reporting company” with very limited exception for entities that are already subject to significant regulations such as charities, large companies with 20 or more employees and over $5 million in revenue, banks, etc.  As such, a “reporting company” includes individuals that formed an LLC for the sole purpose of holding real estate, single-member LLC’s, professional corporations, and family-owned businesses.

When is the Report Due?

Entities formed before January 1, 2024, must complete their Report by January 1, 2025.  Entities formed between January 1, 2024, and December 31, 2024, must complete their Report within 90 days of entity formation.  Entities formed on or after January 1, 2025, will be required to file their Report within 30 days of entity formation.

What Goes Into the Report?

All of the information in the Report is supposed to be confidential.  The Report will include the following information on the entity and the individuals that own and control the entity.

Entity information will include:

  • Legal name and any DBA’s or trade names.
  • Street address for entity’s principal place of business (where the actual business is operated, not the address you list for mail.  So, if you operate your business from your house but have mail go to a third-party mailbox, you must list your home address).
  • State of formation.
  • EIN – if your entity does not have an EIN, the entity will need to get one.


The beneficial owner must report the following:

  • Full legal name.
  • Date of birth.
  • Home address (actual address where they live).
  • A PDF copy of the individual’s passport or driver’s license.


Each entity’s Report will need to include the above personal information about the beneficial owners.  However, if an individual beneficial owner obtains a personal FinCEN ID number, then for each entity with which the individual owner is associated with, the entity need only list the owners’ FinCEN ID number, rather than repopulating the personal data every time.  You may apply for a FinCEN ID number via the above link.

Who is a Beneficial Owner?

A beneficial owner is one who (1) exercises “substantial control” over the entity; or (2) owns 25% or more of the ownership interest of the entity.  So, you can not own any stock and still be considered a beneficial owner.  If you own your stock in a trust, the trustee will register as the beneficial owner.  However, a trust will not be required to register as a reporting company unless it is formed in a state that requires the trust to file a state form for the creation of the trust.

An individual will be considered to have “substantial control” if they: (1) serve as a senior officer; (2) have authority over appointment or removal of a senior officer or a majority of the board of directors or similar body; (3) direct, determine, or have substantial influence over important decisions made by the entity; or (4) have any other form of substantial control.

A senior officer is any individual holding the position or exercising the authority of a president, chief financial officer, general counsel, chief executive officer, chief operating officer, or any other officer, regardless of official title, who performs a similar function.

An ownership interest includes actual equity, stock or similar interest, as well as a convertible instrument, a call, straddle, option, or other instrument, contract or arrangement to establish ownership in the future.

In contrast, a beneficial owner does not include: (a) minor children; (b) individuals acting as an agent on behalf of another individual; (c) employee of a reporting company whose substantial control is derived solely from their employment status, provided they are not a senior officer; (d) creditor of a reporting company; (e) individual who only has a future interest in a reporting company through inheritance.

When in doubt, it is best to get a FinCEN ID number and go through the registration steps because, as you will see below, the failure to comply with the CTA poses a risk of significant penalties.

What Are the Penalties for Failing to File?

Failure to comply with the CTA can result in civil penalties of up to $500 per day, criminal penalties up to $10,000, and up to 2 years’ imprisonment.  There is safe harbor from penalty, whereby you may file a corrected report within 30 days of filing inaccurate information.

You only need to complete the registration once, and there is no ongoing reporting requirement.  However, any changes to the information reported must be reported within 30 days of the change.

Here are some additional resources:


While we will not prepare the Report for you, we are happy to discuss the process and assist you as need be.  Please contact us with any questions.