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The Corporate Transparency Act of 2021 (CTA) is a federal law that came into effect on January 1, 2022. According to the CTA, all "Reporting Companies" are mandated to submit a report to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury. This report should disclose information about: The beneficial owner or owners of the reporting company. The individual, also known as the "applicant," who established the company by filing its formation documents (articles or certificate of organization, articles of incorporation, or certificate of partnership) with a state agency, such as a Secretary of State.

A FinCEN report is a mandatory filing that all "Reporting Companies" are required to submit to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury. This report discloses personal information about each of the company’s beneficial owners and the reporting company’s applicant, particularly if the company was formed after January 1, 2024. The applicant is the individual who established the company by submitting its formation document (such as articles or certificate of organization, articles of incorporation, or certificate of partnership) to a state agency, like a Secretary of State. The obligation to file FinCEN reports stems from the Corporate Transparency Act of 2021, a federal law that came into effect on January 1, 2022.

A "Reporting Company' is an entity that is required to file a FinCEN report and update the report if any information within it undergoes changes. This category encompasses various entities, including but not limited to a limited liability company (LLC), a professional LLC, a corporation, a professional corporation, a limited partnership (LP), a limited liability partnership (LLP), and a limited liability limited partnership (LLLP), provided they are not considered excluded entities. Refer to the list of excluded entities for further clarification. Reporting companies also encompass entities formed outside the United States that conduct business within the U.S.

The majority of entities fall under the category of "reporting companies" and are required to file a FinCEN report as per the Corporate Transparency Act of 2021. Currently, there are twenty four types of entities that are exempt from this requirement. These exempt entities are outlined in the list of exempt entities.

A domestic reporting company refers to a non-exempt entity formed in the United States. This entity is established through the filing of a document with a Secretary of State or a similar office under the law of a state or Indian Tribe. Domestic reporting companies are subject to the reporting requirements outlined in the Corporate Transparency Act.

A Foreign Reporting Company is any entity that is established under the law of a foreign country and is registered to conduct business in the United States by filing a document with a Secretary of State or equivalent office under the law of a state or Indian Tribe is considered within the scope of entities subject to the reporting requirements under the Corporate Transparency Act.

Reporting companies are required to disclose specific information to FinCEN (Financial Crimes Enforcement Network) as mandated by the Corporate Transparency Act (CTA). The information that must be disclosed includes: Legal Name: The legal name of the reporting company. Any Alternative Names (d/b/a names): Any alternative names or "doing business as" names through which the reporting company engages in business. Business Street Address: The physical location or street address of the reporting company's business. Jurisdiction of Formation or Registration: Information about the jurisdiction (state, Indian Tribe, or foreign country) where the reporting company is formed or registered. Unique Identification Number: A unique identification number assigned to the reporting company. This could be a Taxpayer Identification Number (TIN) issued by the IRS, including an Employer Identification Number (EIN), or a Dun & Bradstreet Data Universal Numbering System (DUNS) number, or a Legal Entity Identifier (LEI). It's important to note that the specific details may vary, and entities should refer to the CTA and related regulations for comprehensive guidance on reporting requirements.

The information about a beneficial owner that must be disclosed to FinCEN (Financial Crimes Enforcement Network) includes: Name: The full legal name of the beneficial owner. Address: The residential or business street address of the beneficial owner as of the date on which the FinCEN report was delivered. Date of Birth: The date of birth of the beneficial owner. Identification Number: The Taxpayer Identification Number (TIN) issued by the IRS or, if not applicable, a FinCEN identifier obtained by submitting the required information to FinCEN. Identification Document: Scanned copy of the identification document from which the unique identifying number of the beneficial owner or applicant is obtained, in connection with reporting that unique number. Ownership Interest Percentage: The percentage of ownership interest held by the beneficial owner in the reporting company. Nature of Control: Information about the nature of control exerted by the beneficial owner over the reporting company. This may include details about their authority, decision-making power, or influence within the company. It's essential to note that the Corporate Transparency Act (CTA) and related regulations outline these requirements, and reporting companies should refer to the specific guidelines to ensure compliance with the law. The information disclosure is aimed at enhancing transparency and preventing the misuse of corporate structures for illicit activities.

The regulations specify that only companies formed after 2023 are required to report information about their "applicant." An applicant is an individual who forms a reporting company by filing an application to establish a corporation, limited liability company, or similar entity under the laws of a State or Indian Tribe. It also includes individuals who register or file an application to register a corporation, limited liability company, or similar entity formed under the laws of a foreign country to do business in the United States by filing a document with the Secretary of State or similar office under the laws of a State or Indian Tribe. For reporting companies formed or registered before the effective date of the regulations, and where the company applicant passed away before the reporting company had an obligation to obtain identifying information from the applicant, the reporting company may report this fact along with whatever identifying information it actually knows about the deceased company applicant. Moreover, the definition of a company applicant also includes any individual who directs or controls the filing of such a document by another person. This ensures that the reporting company provides information on individuals responsible for the decision to form a reporting company. In cases where the company applicant is an employee of a business formation service, law firm, or an associate, agent, or family member filing on behalf of another individual, the individual directing or controlling the formation of a legal entity must disclose their identity to FinCEN along with the individual who actually made the filing. This prevents the anonymous disclosure of the individual directing the filing process.

A beneficial owner, concerning an entity, refers to an individual who, either directly or indirectly, through any contract, arrangement, understanding, relationship, or other means, exercises substantial control over the entity or owns or controls not less than 25 percent of the ownership interests of the entity. However, the following individuals are not considered beneficial owners: A minor child, as defined in the State in which the entity is formed, if the information of the parent or guardian of the minor child is reported in the FinCEN report. An individual acting as a nominee, intermediary, custodian, or agent on behalf of another individual. An individual acting solely as an employee of a corporation, limited liability company, or other similar entity, and whose control over or economic benefits from such entity are derived solely from the employment status of the person. An individual whose only interest in a corporation, limited liability company, or other similar entity is through a right of inheritance. A creditor of a corporation, limited liability company, or other similar entity, unless the creditor meets the requirements of the first sentence above. An individual may meet the 25 percent ownership threshold by jointly owning or controlling an undivided ownership interest in a reporting company with one or more other persons. In the case of a married couple owning 25% or more of an entity as community property or joint tenants, both individuals are considered beneficial owners. Moreover, an individual may directly or indirectly own or control an ownership interest in a reporting company through a trust or similar arrangement. The individual may hold ownership interests through various roles, including as a grantor or settlor, a beneficiary, a trustee, or another individual with authority to dispose of trust assets. Regarding trust beneficiaries specifically, FinCEN deems it appropriate to consider an individual as owning or controlling ownership interests held in trust if the individual is the sole permissible recipient of both income and principal from the trust, or has the right to demand a distribution of, or withdraw substantially all of the assets from, the trust. Other individuals with authority over trust assets, such as trustees, will also be considered as controlling the ownership interests held in trust. Grantors or settlors who retain the right to revoke the trust or otherwise withdraw its assets are also regarded as controlling the ownership interests.

Yes, a trustee of a trust can be considered a beneficial owner of a reporting company if the trust owns 25 percent or more of the reporting company or if the trustee has substantial control over the reporting company. In such cases, the trustee's information may be required to be disclosed in a FinCEN report, as they meet the criteria for being identified as a beneficial owner of the reporting company. The determination is based on the level of control and ownership exercised by the trust and its trustee over the reporting company.

If an individual qualifies as a beneficial owner of a reporting company by owning at least 25 percent of the ownership interests, and the beneficial owner passes away, a change regarding the required information is considered to occur when the estate of the deceased beneficial owner is settled. In such a scenario, the reporting company is obligated to disclose the death and the change in beneficial ownership. Upon the settlement of the estate of a deceased beneficial owner, whether through the operation of intestacy laws or a testamentary disposition within a jurisdiction in the United States, the reporting company is required to file an updated report. This updated report should remove the deceased former beneficial owner and, where applicable, identify any new beneficial owners that may have emerged as a result of the settlement of the estate.

The regulations outline three specific indicators of substantial control over a reporting company: Service as a senior officer of a reporting company: Individuals holding senior officer positions are considered to have nominal or de jure authority. Authority over the appointment or removal of any senior officer or dominant majority of the board of directors (or similar body) of a reporting company: This indicator identifies individuals with functional or de facto authority. Direction, determination, or decision of, or substantial influence over, important matters of a reporting company: This category recognizes individuals with functional or de facto authority over key aspects of the reporting company. Additionally, the regulations include a catch-all provision to acknowledge that substantial control can take forms not specifically listed. Each of these indicators aims to identify individuals who stand behind and direct the actions of a reporting company. The first indicator focuses on those with nominal authority, the second and third indicators target individuals with functional authority, and the catch-all provision allows for the recognition of control exercised in unique ways. This approach aligns with common law traditions and standards while preventing individuals from evading identification as beneficial owners through formalities such as job titles. Furthermore, the holder of a debt instrument where the reporting company is the debtor is considered a beneficial owner if the creditor's rights enable them to exercise the same rights as specified equity or other interests, including the ability to convert the instrument into one of the specified equity or other interests.

A FinCEN identifier is a code issued by FinCEN to an individual or an entity, serving as a means to identify that person or entity in a FinCEN report. When a FinCEN identifier is utilized in a FinCEN report, the required information about the beneficial owner or applicant does not need to be explicitly included in the report. Instead, the FinCEN identifier serves as a reference point for the identification of the relevant individual or entity, streamlining the reporting process.

If a married couple collectively owns 25% to 49.99% of a Reporting Company, both individuals are considered beneficial owners, and their information must be disclosed in the reporting company's FinCEN report. The disclosure requirement is because, in such cases, both individuals together are deemed to have substantial control over the reporting company. It's important to note that the disclosure obligation is triggered not only by direct individual ownership but also by joint ownership where, collectively, the couple would be considered to have substantial control over the reporting company. In this scenario, the reporting company is required to disclose the information of both individuals in its FinCEN report.