The Corporate Transparency Act (CTA) was implemented as part of the National Defense Authorization Act (NDAA). The CTA mandates a “reporting company” to file a report with the Financial Crimes Enforcement Network (FINCEN) disclosing the “beneficial owners” of the reporting company.

The following Frequently Asked Questions (FAQs) provide responses to the most common questions concerning the beneficial owner report (BOI).

1) What is a Beneficial Owner Information (BOI) report?

The BOI report is a form that must be submitted with the Financial Crime Enforcement Network (FINCEN) to identify the beneficial owners of a U.S. company. Additionally, the BOI report must identify the company applicant of the respective company. Generally, the BOI report must be filed within 14 days of incorporating a U.S. company. For U.S. companies incorporated before January 1, 2021, the BOI report must be send to FINCEN within 1 year of the effective date of the final regulations to be issued by the Treasury.

2) Is the BOI report mandatory?

YES! The BOI report is mandatory for all companies incorporated in the U.S. Only exempt companies are not subject to the requirements of the CTA.

3) What is a “reporting company”?

A reporting company is any U.S. company that is incorporated with a Secretary of State. This includes any of the following types of companies: LLC (Limited Liability Company), Corporations, Professional Corporations (PC), and LP (Limited Partnerships), Real Estate Investment Trust, Cooperative associations. Also, some trusts may be subject to the CTA provisions.

4) What type of companies are not a “reporting company”?

The Corporate Transparency Act (CTA) exempts the following entities from filing a BOI report.:

    • Securities issuer (e.g. a public company).
    • Domestic governmental authorities.
    • Banks.
    • Domestic credit unions.
    • Depository institution holding companies.
    • Money transmitting business.
    • Brokers or dealers in securities.
    • Other Securities Exchange Act of 1934 entities.
    • Securities exchanges and clearing agencies.
    • Registered investment companies and advisers
    • Venture capital fund advisers.
    • Insurance companies.
    • State licensed insurance producers.
    • Registered utilities under the Commodity Exchange Act.
    • Public accounting firms registered in accordance to Sarbanes-Oxley Act.
    • Public utilities.
    • Financial markets utilities.
    • Pooled investment vehicles.
    • Tax exempt entities.
    • Entities assisting tax exempt entities.
    • Large operating companies.
    • Subsidiaries of certain exempt entities.
    • Inactive business.

5) Does it make any difference for filing a report, if I own an LLC or a Corporation?

No. For purposes of the CTA, an LLC and a corporation must file a BOI report disclosing their beneficial owners and their company applicant.

6) I am a partner in a U.S. partnership, does the CTA requirements apply to me?

Generally, yes. A Limited Partnership (LP) is usually formed by filing a certificate of formation with the secretary of state. A LLP (Limited Liability Partnership) is also registered with a secretary of state and therefore is subject to the CTA.

7) Is a trust subject to the requirements of the CTA?

If the trust is required to submit a certificate of trust with a secretary of state, the trust is subject to submit a BOI report. For example, a business trusts (commonly referred as a Massachusetts trust) or a statutory trust organized in Delaware.

8) Who is a “beneficial owner”?

Any individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, (i) exercises substantial control over the entity or (ii) owns or controls not less than 25% of the ownership interests in the company.

9) What is substantial control?

Generally, an individual exercises substantial control when such person controls a company, by any means (contract, senior position, etc). The following individuals are examples of individuals exercising substantial control:

    • An individual that acts as a senior officer of a company.
    • An individual that has authority over the appointment or removal of any senior officer.
    • An individual that directs, determines or decides, or has substantial influence over, important matters of a reporting company.

10) Who is not a beneficial owner?

There are five categories of individuals that are not considered as beneficial owners. These categories are: minor children, nominees or other intermediaries, employees, inheritors, creditors.

11) My company has 2 or more members or shareholders. Am I required to identify each of the members or shareholders as beneficial owners?

Yes. The BOI report requires that each beneficial owner must be identified and disclosed. If for example an LLC has one member with 10% of ownership but that person is the sole manager of the LLC, such member is a beneficial owner under the substantial control test.

12) What information must be included in the BOI report?

The BOI report must include the following information for the company: Name (include any dba), State of formation, EIN.
For the beneficial owner, the BOI report must include: full name, date of birth, residential address used for tax residency purposes, unique identifying number, identification document.
For the company applicant forming the company: full name, date of birth, residential address used for tax residency purposes, unique identifying number, identification document.