Beginning January 1, 2024, new regulations by the Financial Crimes Enforcement Network (FinCEN) under the Corporate Transparency Act (CTA) will require many entities to report information regarding their “beneficial owners” and “company applicants.” This new requirement will affect approximately 32 million existing entities and an estimated 5 million new entities annually moving forward. This FAQ will outline the new requirements and provide guidance for companies that will be required to report under the CTA.
What Companies Need to Report?
The CTA requires all “reporting companies” to comply with the new FinCEN regulations. A “reporting company” is a corporation, limited liability company, or other similar entity, which was created by filing a document with the secretary of state or similar office of a State or Tribe. Reporting companies include foreign entities registered to do business in the U.S. after filing a document with the secretary of state or similar office of a State or Tribe.
If you had to file a document with a State or Tribal-level office, such as a secretary of state, to create your entity or register it to do business in the U.S., then your entity is a reporting company, unless an exemption applies.
Are Any Companies Exempt from the Reporting Requirements?
The CTA includes a list of 23 categories of exempt entities, including an exemption for large operating companies. To qualify as a large operating company, the entity must: (i) operate a physical office within the United States, (ii) have 20 or more full-time employees, and (iii) have at least $5 million in gross receipts from U.S. income as reported on its previous year’s tax return. The following entities are also explicitly exempted from the reporting requirements:
- Securities Issuers
- Domestic Government Authorities
- Banks
- Domestic Credit Unions
- Depository Institution Holding Companies
- Money Transmitting Businesses
- Brokers or Dealers in Securities
- Securities Exchange or Clearing Agencies
- Other Entities Registered Pursuant to the Securities Exchange Act of 1934
- Registered Investment Companies and Advisers
- Venture Capital Fund Advisors
- Insurances Companies
- State Licensed Insurance Producers
- Entities Registered Pursuant to the Commodity Exchange Act
- Accounting Firms
- Public Utilities
- Financial Market Utilities
- Pooled Investment Vehicles
- Tax Exempt Entities
- Entities Assisting Tax Exempt Entities
- Large Operating Companies
- Wholly owned Subsidiaries of Certain Exempt Entities
- Inactive Businesses
What Company Information Should Be Included in the Report?
Reporting companies must provide the following information:
- The full legal name of the reporting company.
- Any trade name or “doing business as” name of the reporting company.
- The street address or the principal place of business of the reporting company.
- For a company with a principal place of business outside of the U.S., the company should provide the street address of the primary location in the U.S. where the company conducts business.
- The street address requirement is not satisfied by a P.O. Box or the address of a company formation agent or other third party.
- The State or Tribal jurisdiction of formation of the reporting company (or for foreign reporting entities, the State or Tribal jurisdiction where such company first registers).
- The reporting company’s IRS taxpayer identification number (“TIN”).
- Foreign entities without a TIN are required to provide a foreign tax identification number.
