January 26, 2024

Corporate Transparency Act: How The New Reporting Law Will Impact Your Small Business & What You Need to Do Now

Kate Hembree AvatarKatie S. Hembree

Corporate Transparency Act: How The New Reporting Law Will Impact Your Small Business & What You Need to Do Now

Effective January 1st 2024, if you currently own or control a corporation, LLC, or other closely held business, you are now required by law to file a report with the U.S. Department of Treasury unless you are subject to an exemption. These filings must contain information on each beneficial owner and control person in the business and must be filed by the appropriate deadline depending on when the entity was formed. Once the filing is complete, nothing else needs to be done unless there is a change in the business or beneficial owners. Failure to file these reports subject senior officers and beneficial owners to civil and potentially criminal penalties. We can help you determine who the beneficial owners and control persons are and properly file all the required information. Keep reading to learn more about this new reporting requirement and find out what you need to do to comply with the law. Contact Katie Hembree at 912-236-3311 or khembree@olivermaner.com if you have any questions or need assistance.

The Corporate Transparency Act (CTA) has been enacted to combat financial crimes, including money laundering, tax fraud, terrorist financing, and other illegal acts done through business entities. A secure database has been created by the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) to which companies must report their beneficial ownership information for all applicable individuals. The CTA establishes reporting rules for corporations, limited liability companies, and other entities formed or registered to do business in the U.S. The Reporting Rule requires certain entities to file beneficial ownership information (BOI) reports to FinCEN. These reports will contain information about the entity, the beneficial owners, and the company applicants. Starting on January 1, 2024, FinCEN began taking beneficial ownership information reports on FinCEN’s website in the BOI E-Filing system. If these reports are not filed on time or contain fraudulent information, then the entity and individuals are subject to strict civil and criminal penalties.

Which companies are required to report BOI to FinCEN?

Entities are required to report if they meet the Reporting Rule’s definition of a “reporting company” and do not qualify for an exemption. The company may be a reporting company if any of the following apply:

  • If the company is a corporation;
  • If the company is a limited liability company (LLC);
  • If the company was created by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe (this would include Limited Partnerships, LLP’s and LLLP’s, but not General Partnerships); or
  • If the company is a foreign company registered to do business in any U.S. State or Tribal jurisdiction by filing a document with a secretary of state or similar office of the State or Tribe.

    Which companies are exempt from reporting?

    There are 23 exemptions to the “reporting company” definition which includes publicly traded companies, banks and credit unions, insurance companies, public accounting firms, and tax-exempt entities. There is also an exemption for a “large operating company” which is an entity operating in the U.S. that has more than 20 full time employees and reports more than $5,000,000 in gross receipts or sales from U.S. sources. 

    Who is a beneficial owner?

    A beneficial owner is any INDIVIDUAL who exercises substantial control over a reporting company OR owns or controls at least 25% of the ownership interest of the company. When there is indirect ownership or control, you must really dig into the entity or Trust to find the individuals who have substantial control over those indirect owners.

    What is substantial control?


    An INDIVIDUAL exercises substantial control over a company if they meet any of the following criteria:

  • The individual is a senior officer (President, CEO, COO, CFO, General Counsel or similar officer);
  • The individual has authority to appoint or remove senior officers or a majority of directors of the reporting company; 
  • The individual is an important decision-maker over business, finances, or structure of entity; or
  • The individual has any other form of substantial control over the reporting company (meant to be a catch all for unique situations). 
  • Board of Directors: While it is not clearly stated that members of a company’s Board of Directors be listed, the CTA requirements are broad, and it would be prudent to report them.

    LLC Managers: LLC Managers, while not specified, should be reported, like Directors.

    What is ownership interest?


    Ownership interest includes equity, stock, or voting rights; capital or profit interests; convertible instruments; options or privileges; and any other possible instrument, contract, or mechanism to establish ownership.

    Entity Ownership: Indirect ownership occurs when there is another entity (or Trust) that has at least a 25% ownership interest. The report must include all applicable information for INDIVIDUALS with substantial control of the indirect owner entities or Trusts.

    Trusts: Trusts which own more than 25% of the ownership interest must be considered and INDIVIDUALS with substantial control over the Trust must be reported and that would be the Trustee, a Beneficiary who is the sole recipient of income or principal who can demand distribution of or withdraw substantially all of the trust assets, or a Grantor who has the right to revoke the Trust or withdraw all of the trust assets

    Who is not a beneficial owner?

    There are five exceptions when an individual who would otherwise be a beneficial owner qualifies for an exception and therefore doesn’t have to be included in the report. The beneficial owner exceptions apply to any of the following types of individuals:

  • Minor child;
  • Individual acting as nominee, intermediary, custodian, or agent;
  • Employee (subject to the control of the employer and is not a senior officer of the company);
  • Inheritor (ownership is through a future right of inheritance like a Will); or
  • Creditor.
  • Figure 1 below provides a flow chart for determining if an individual is a beneficial owner.



    Who is the company applicant?

    The company applicant is the individual who directly or electronically filed the creation or first registration document for the reporting company with the secretary of state. This is often the incorporating or organizing attorney. The company applicant for every entity formed after January 1st 2024 must be included in the report. Company applicants for entities formed before January 1st 2024 do not need to be included in the report. Figure 2 below provides a flow chart determining if the company applicant must be included in the report.

    Figure 2


    What company information must be reported?

    Companies that are subject to the Reporting Rule will have to disclose the following information on the entity:

  • Full legal name of company
  • Any trade name or “doing business as” name
  • Complete current U.S. address (principal place of business)
  • State of formation (or tribal or foreign jurisdiction of formation)
  • IRS Employer Identification Number (EIN)

    What beneficial owner information must be reported?

    Companies that are subject to the Reporting Rule will have to disclose the following information on all INDIVIDUAL beneficial owners and company applicants:

  • Full legal name
  • Date of birth
  • Current residential address
  • An image of one of the following:

  • U.S. Passport
  • State driver’s license
  • State, government, or Tribe issued ID 
  • Foreign passport if doesn’t have any of the above
  • Figure 3 below provides what information must be included in the report.


    When do these reports have to be filed by?

    Entities formed prior to January 1st 2024 have until January 1st 2025 to file their report. Entities formed between January 1st 2024 and January 1st 2025 have 90 days after receiving notice of creation or registration to file their initial BOI reports. Entities formed after January 1st 2025 will have 30 days from receipt of creation or registration notice to file their reports. Any changes in the required information for the report must be updated within 30 days of the change occurring. If there are any inaccuracies in the report, the entity has 30 days from the time of discovering or having reason to know of an inaccuracy to correct the report. Figure 4 is a chart of these deadlines.

    Figure 4


    When do these reports need to be updated?

    Any of these events require the report to be updated within 30 days of the triggering event:

    If a beneficial owner:

  • Legally changes their name (due to marriage, divorce, or any other reason)
  • Changes their home address
  • Gets a new driver’s license number
  • If the entity:

  • Changes their legal name
  • Registers a new assumed name
  • Moves principal place of business
  • Changes who the beneficial owners are (changes in who has substantial control or ownership interest)
  • If any senior officers are changed, removed, or added
  • Figure 5 is a chart indicating which events require the report to be updated within 30 days

        Figure 5



    What are the penalties for failing to comply with the Reporting Rule?

    Companies, senior officers, and beneficial owners (all individuals who need to be listed in the report) are subject to strict penalties if they fail to properly comply with the Reporting Rule. The criminal penalties include up to two years of imprisonment and/or a fine up to $10,000.

    The civil penalty includes up to $500 each day that the violation continues. Senior officers and beneficial owners expose themselves to these fines and imprisonment if they fail to comply with the Reporting Rule by fraudulently reporting information, neglecting to report information at all, or failing to meet the reporting deadlines.

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