In 2021, Congress passed the Corporate Transparency Act (“CTA”), a law requiring a new beneficial ownership information reporting requirement as part of the U.S. government’s efforts to make it harder for bad actors to hide or benefit from improper gains through shell companies or other opaque ownership structures.

Starting January 1, 2024, the CTA will mandate "reporting companies" to submit a report to FinCEN, disclosing info about their "beneficial owners." Those formed before 2024 have until 2025 for their initial report. Proposed regulations issued on September 27, 2023, extend the initial report deadline for companies formed between 2024 and 2025 to 90 days from formation. Companies formed after 2025 must report within 30 days.

A reporting company encompasses entities filed within the US or foreign entities doing business within US states, territories, or Indian tribes. There are over twenty types of entities exempt from the reporting requirements. These entities include, but are not limited to, publicly traded companies meeting specified requirements, banks, venture capital fund advisors, insurance companies, inactive entities, many nonprofits, and certain large operating companies.

"Beneficial owners" are individuals who directly or indirectly control or own at least 25% of an entity's ownership interests and it is normal for companies to have multiple beneficial owners. Accountants and lawyers who provide general accounting or legal services are not considered beneficial owners as standard arms-length advisory or other third-party professional services are not considered to be “substantial control.”

For companies formed after 2024, up to two "company applicants" must be identified. A company applicant is an individual who directly files or is primarily responsible for the filing of the document that creates or registers the company.

Reports will include full legal names, birthdates, current addresses (or business addresses for company applicants involved in entity formation), and ID information from documents like a US passport, driver's license, or foreign passport if no US document is available. If you are required to report your company’s beneficial ownership information, you will do so electronically through a secure filing system available via FinCEN’s website. This system is currently being developed and not available at the time this blog is published.

You can find the answer to many FAQs here, and as new information comes out we plan to create a helpful checklist and other resources to aid our clients with these new reporting requirements. Archetype is committed to helping our community stay compliant, and don’t hesitate to reach out if there is any assistance we can supply on this matter, or any others.