After a series of legal challenges, the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a binding interim rule under the Corporate Transparency Act which eliminates beneficial ownership information reporting (BOIR) requirements for domestic entities and U.S. persons. Such reporting requirements are now applicable only to entities that are formed under the law of a foreign country and which are registered to do business in the U.S. The following article outlines the Corporate Transparency Act’s BOIR requirements in effect prior to the issuance of the recent interim rule.
The U.S. Congress enacted the Corporate Transparency Act (CTA) in 2021, aiming to enhance corporate transparency and combat financial crimes. The CTA became effective on January 1, 2024, and requires certain corporations, limited liability companies, and other similar entities to report beneficial ownership information (BOI) to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) about the individuals who ultimately own or control them.
Reporting companies under the CTA include corporations, limited liability companies, and similar entities formed in the U.S., and foreign entities registered to do business in the U.S. While the reporting requirements are intended to apply broadly, certain larger or otherwise highly regulated entities may be exempt from the CTA.
A reporting company must file a BOI report with FinCEN to identify itself, including information regarding its legal name, any trade names, current street address of principal place of business, formation jurisdiction, and tax identification number.
A reporting company must also report information about each of the company’s “Beneficial Owners.” Beneficial owners are broadly defined, and involve individuals who directly or indirectly (i) own more than 25% of the entity’s ownership interests, or (ii) exercise substantial control over the reporting company (even if they do not actually have an ownership interest). The CTA’s requirement that reporting companies disclose beneficial ownership at the level of the individual natural person means that a reporting company may have to look through ownership interest held by a non-natural person to calculate the indirect ownership percentage attributed to individuals. The term “ownership interest” encompasses a broad range of ownership structures, including equity, stock, profits interests and warrants. The CTA’s requirement that reporting companies report individuals who exercise substantial control over the reporting company as beneficial owners means that many senior officers of the company, even if they do not actually have an ownership interest, will need to be reported as beneficial owners. The term “substantial control” is broad and may include individuals who directly or indirectly have the authority to make significant business decisions or exercise substantial influence over the company’s policies.
The types of information that must be provided (and kept current) for these beneficial owners include the owner’s legal name, residential address, date of birth, and unique identifier number from a nonexpired passport, driver’s license, or state identification card. The reporting entity will also have to provide to FinCEN an image of the identification document for all beneficial owners.
If a reporting company is formed on or after January 1, 2024, the company must also report information about the company applicant(s). An entity’s “company applicant” is the individual or individuals who filed the documents creating the entity and/or were primarily responsible for directing or controlling the filing of the relevant formation documents. The company applicant is often the entity’s legal representation/general counsel. For clarity, if a reporting company was formed prior to January 1, 2024, then company applicants do not need to be identified in the report.
Individuals and reporting companies can request a FinCEN Identifier (FinCEN ID) to use in place of supplying detailed information on the report. A FinCEN ID is a unique number assigned by FinCEN obtained by submitting the same information as is required of a beneficial owner or reporting company. A FinCEN ID may be useful to individuals that prefer to send their personal information directly to FinCEN rather through a reporting company, or to individuals that may be required to supply information as a beneficial owner or company applicant of several reporting companies.
On March 21, 2025, FinCEN issued the interim final rule limiting the CTA’s requirements to foreign entities registered to do business in the U.S. For existing foreign companies registered to do business in the U.S., the deadline to file a BOI report is now April 25, 2025. Foreign companies that register to do business in the U.S. on or after March 21, 2025 must file their BOI report within 30 days of registration.
After a reporting company has filed its initial BOI report, it will also have an ongoing responsibility to file an updated BOI report if there is any change to the previously reported information about the reporting company or its beneficial owners. Updated BOI reports must be filed within 30 days of the date on which the change occurred. Potential penalties for willfully failing to file both initial and updated BOI reports are steep—$500 per day that the report is late, up to $10,000, and/or up to two years in prison.
All companies should undertake an analysis of their compliance and reporting requirements under the CTA for all entities within their structure. We are committed to helping our clients navigate these reporting requirements. For more information about the CTA and BOI filings, please contact Paul Morton (pmorton@hestonmorton.com) or Megan Moran (mmoran@hestonmorton.com).
