What is the Corporate Transparency Act?

Note: the Corporate Transparency Act has had several materials changes since it's initial implementation, and both its rules and enforcement are in flux. Please refer to our latest CTA news for the most up to date information, which supercedes the below.

What information do businesses need to provide?

Each company needs to file information about itself:

Full name of the reporting company
Any trade or d/b/a names of the reporting company
Street address of the principal place of business (can’t be a P.O. box or the address of a company formation agent or other third party)
State (or foreign jurisdiction) of formation
TIN (including an Employer Identification Number (EIN))
Foreign companies can provide a foreign TIN

Each company also needs to file information about every Beneficial Owner (you may see this described as Beneficial Owner Information, BOI). Either the individual's FinCEN identifier, OR this information:

Full legal name
Date of Birth
Current residential street address
Unique identifying number from an identification document (e.g., a passport) and jurisdiction of that document
- Acceptable ID documents
  - U.S. passport;
  - a state, local, or Tribal government issued identification document
  - a State-issued driver's license;
  - or, if an individual lacks one of those other documents, a foreign passport‍
Image of a non-expired document proving the ID number provided

What is a Beneficial Owner?

Any person who either:

Exercises substantial control over the reporting company (e.g. a senior officer of the company that has authority over the appointment or removal of any senior officer or a majority of the board of directors)

Owns or controls at least 25 percent of the ownership interests of a reporting company (directly or indirectly)

Also, anyone who actually files the documents that created the company, such as their lawyer or the lawyer’s paralegal or other staff (the “Company Applicant”), must also have their information reported with the initial filing.

What are the penalties?

An individual may file a report on behalf of a reporting company, but the reporting company is “ultimately responsible” for the filing, and liability lies with the actual people listed on the filing. The penalties are steep: civil penalties up to $10,000, and criminal penalties up to 3 years in jail.

What is the point of the Corporate Transparency Act?

The stated purpose of the law is to prevent illicit actors from using shell and front companies to hide their identities and launder money, which helps counter terrorism, for example.

Who is exempt from the Corporate Transparency Act?

There are more than 20 types of companies exempt from the CTA, mainly companies that already provide Beneficial Ownership Information in some other capacity, or highly regulated companies, like banks, insurance companies, and tax-exempt entities, and now domestic US entities.

Importantly, “Large Operating Companies” are also exempt. Large Operating Companies:

Have more than 20 full-time employees in the US
Have a physical presence in the US
Filed taxes showing more than 5M in sales in the past year (excluding sales outside the US)

What happens if any of the information you submitted changes?

If any of the previously provided information changes (except for the Company Applicant’s information), the company must file an updated report within 30 days.

If you want to read the actual rules and guidance directly from FinCEN, you can do so here.

Can you use Discern to file Beneficial Ownership Information Reports?

Yes. Discern customers can file unlimited Beneficial Ownership Information Reports for the Corporate Transparency Act using our modern filing engine. You'll never have to enter the same information twice, making it simple to file hundreds or thousands of initial and updated reports.

Discern also provides Registered Agent service, automates annual report filing, and provides franchise tax guidance and alerting.