4 min. read
With the Corporate Transparency Act (CTA) now in effect, over 32 million businesses are encountering a fresh reporting obligation. This legislative measure underscores a fundamental shift towards transparency in corporate practices. Compliance with the requirement to disclose beneficial owners is crucial for startups and other entities.
Rationale for Introducing the New Obligation
CTA mandates the reporting of beneficial ownership information (BOI) to the Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury, (FinCEN) to increase transparency and combat illicit activities like money laundering and terrorism financing. By identifying the actual individuals who own or control reporting companies, the CTA aims to prevent the misuse of U.S. entities for illegal purposes.
Key Points to Note
Who Is Affected by Reporting Requirements?
Domestic Reporting Companies: These include corporations, limited liability companies (LLCs), and other entities formed through the filing of documentation to a Secretary of State or similar office/agency within the United States.
Foreign Reporting Companies: These are entities, such as corporations and LLCs, established under the laws of a foreign jurisdiction but have registered to conduct business within the United States by filing documentation with a Secretary of State or equivalent authority.
It is essential to understand that even if your entity has only one owner, you are still obligated to comply with the reporting requirements outlined in the CTA. This means you must file beneficial ownership information with FinCEN.
Certain entities, such as inactive entities, publicly traded companies, nonprofit organizations, financial institutions like banks and credit unions, and insurance companies, are exempt from reporting requirements.
Reporting Deadlines
| Entity Incorporation Date | Initial BOI Report Deadline |
| Before January 1, 2024 | January 1, 2025 |
| On or after January 1, 2024 | Within 90 days of receiving company registration notice from the Secretary of State. |
| On or after January 1, 2025 | Within 30 days of receiving company registration notice from the Secretary of State. |
Who Qualifies as a Beneficial Owner?
If you are a reporting company, you should identify your beneficial owners. A beneficial owner is identified as an individual who:
- Exercises substantial control over the reporting company, or
- Owns or controls at least 25% of the company’s ownership interests.
While identifying individuals who own at least 25% of the company’s ownership interests is relatively straightforward, determining those who exercise substantial control requires careful consideration and analysis of their influence and decision-making authority within the organization. Check the table below to identify those with substantial control:
| Category | Description |
| Senior Officers | Individuals occupying executive positions such as CEO (Chief Executive Officer), CFO (Chief Financial Officer), COO (Chief Operating Officer), General Counsel or President. |
| Appointment or Removal Authority | Individuals with the authority to appoint or remove key personnel within the company, such as directors, managers, or executives. |
| Important Decision Makers | Individuals who play a crucial role in making significant decisions that impact the company’s operations, finances, or strategic direction. Such decisions may include the transfer of primary company assets, substantial investments, restructuring, dissolution proceedings, mergers, or amendments to governance documents. |
| Catch-All | Any individual who exercises substantial influence or control over the company’s operations, regardless of their formal title or role. Identifying individuals in this category may require a case-by-case assessment of their level of influence and involvement in the company’s decision-making processes. |
What Information Must Be Reported?
Reporting companies must submit information on:
- The company itself: legal name, trade names, address, jurisdiction of formation, TIN;
- Its beneficial owners: name, date of birth, address, identifying number, and an image of an identifying document; and
- Company applicants who initially registered the company (applicable for entities formed on or after January 1, 2024): same information as required for beneficial owners.
Liability and Penalties
Failure to comply with the CTA’s reporting requirements can result in severe penalties, including civil penalties of up to $500 per day and criminal penalties of up to two years in prison and fines up to $10,000.
Updates and Corrections
Following the submission of the initial BOI report, companies must continue to maintain their compliance by promptly updating their BOI within 30 days of any changes. This includes modifications to beneficial ownership, company details, or the resolution of disputes over ownership or control, as well as any address changes or other updates.
For inquiries regarding BOI filing services or assistance with filing these reports, please do not hesitate to contact us at gulbabil.kokver@oguz.law or info@oguz.law. Our team is here to provide guidance and support throughout the process, ensuring compliance with regulatory requirements.
