Compliance with New Reporting Requirements under the Corporate Transparency Act

The Corporate Transparency Act (CTA) went into effect this year and requires businesses to disclose the identities and provide additional information about its beneficial owners, defined as or the individuals who ultimately control the company. Companies formed before January 1, 2024, must file their “beneficial ownership information” (BOI)  reports to the Financial Crimes Enforcement Network (FinCen) no later than January 1, 2025. Companies created after January 1, 2024, must file their BOI reports within 90 days after receiving notice of formation or registration.¹

This reporting requirement will apply to most professional medical corporations if they have fewer than 21 full-time employees or reported less than $5 million in gross receipts or sales in the previous year’s federal income tax returns.² The company’s BOI report can be submitted to FinCen through a secure filing system available on its website: https://boiefiling.fincen.gov. 

If you would like assistance with the filing requirement, please reach out to one of the listed attorneys.

Frequently Asked Questions

1. Which individuals are required to report their information?

Beneficial owners of reporting companies are the individuals who, directly or indirectly, either a) exercise substantial control or b) own or control not less than 25 percent of the ownership interests of the company.³  

Individuals with substantial control over a reporting company include: 

• senior officers, such as the President, CFO, CEO, COO, or any other officer, regardless of official title, who performs a similar function;⁴ 
• a person with authority over the appointment or removal of any senior officer or majority of the board of directors (or similar body); or
• a person who can direct, determine, or have substantial influence over important decisions made by the company.⁵

The following individuals are not considered beneficial owners:

• a minor child if the information of the parent or guardian is reported;
• an individual acting as a nominee, intermediary, custodian, or agent on behalf of another individual;
• an individual acting solely as an employee of the company and whose control over or economic benefits from such entity is derived solely from their employment status;
• an individual whose only interest in the company is through a right of inheritance; or
• certain creditors.⁶

Reporting companies created after January 1, 2024, must additionally report the company applicant, or the individual who filed the application to form the reporting company.⁷ 

2. What information is included in the initial BOI report?

The BOI report includes the beneficial owner’s: 

• full legal name; 
• date of birth; 
• current residential or business address; 
• the identification number from a valid US passport, driver’s license, government or Indian Tribe ID document, or foreign passport; and
• an image of that identification document.⁸  

If there is a change with respect to required information already submitted to FinCEN concerning the company or its beneficial owners’ information, an updated report should be filed within 30 calendar days after the date on which such change occurs.⁹ 

The BOI report also requests the following information about the reporting company:

• full legal name;
• any trade name or “doing business as” name;
• complete current address;
• the State, Tribal, or foreign jurisdiction of its formation or where it first registered; and

the Internal Revenue Service Taxpayer Identification Number.¹⁰

3. How often must BOI be reported?

BOI reporting is required only once, unless a company needs to update or correct information.¹¹

4. Is BOI publicly available?

No, FinCEN will store the BOI in a secure nonpublic database. Additionally, BOI reports are exempt from disclosure under the Freedom of Information Act.¹² 

Only certain government agencies may request access to BOI for security or tax activities. Otherwise, a financial institution, with the reporting company’s consent, may access the BOI to facilitate its compliance with customer due diligence requirements under applicable law.¹³

5. Are there penalties for noncompliance?

Yes, civil penalties will apply if a person fails to report or update BOI to FinCEN. Civil and criminal penalties will apply if a person willfully provides false or fraudulent information.¹⁴

6. Are spouses of beneficial owners required to comply with the reporting requirements?

Possibly. Current guidance suggests that if the business interest owned by an individual is characterized as community property under applicable law, both the named owner and the spouse would be considered beneficial owners, requiring both to be included in the CTA filing.¹⁵

7. Why is this information being collected?

The CTA was enacted in 2021 to aid law enforcement in combatting money laundering, tax fraud, terrorism financing, and other illicit activity conducted through anonymous shell companies. FinCen is a new bureau of the U.S. Department of Treasury.¹⁶ 

1.  31 C.F.R. § 1010.380(a)(1); https://www.fincen.gov/boi-faqs.
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2.  Id. § 1010.380(c)(xxi).
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3.   Id. § 1010.380(d).
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4.   Id. § 1010.380(f)(8).
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5.   Id. § 1010.380(d)(1).
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6.   Id. § 1010.380(d)(3).
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7.   Id. § 1010.380(b)(2)(iv), (e).
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8.   Id. § 1010.380(b); 31 U.S.C. § 5336(a)(1), (b)(2)(A).
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9.  31 C.F.R. § 1010.380(a)(2).
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10.   Id. § 1010.380(b)(1)(i).
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11.  See  Id. § 1010.380(a).
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12.  See 31 U.S.C. § 5336(c)(3); FinCen FAQs A6, available at https://www.fincen.gov/boi-faqs.
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13.  31 U.S.C. § 5335(c)(2)(B), (c)(5).
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14.  § 5335(h); see FinCen FAQs K2.
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15.  See FinCen FAQs D18.
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16.  See FinCen FAQs A2.
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