Corporate Transparency Act

The Corporate Transparency Act went into effect on January 1, 2024, and as of when this article was written (1/1/2024), most companies must comply. CTA is evolving (see recent headlines). For the latest information, please visit the FinCEN Newsroom.‍‍

What is the Corporate Transparency Act?‍

The Corporate Transparency Act (CTA), under the Anti-Money Laundering Act of 2020, requires “Reporting Companies” to produce detailed reporting to the Financial Crimes Enforcement Network (FinCEN) to enhance transparency and combat illicit activities. The purpose is to target money laundering through anonymous entities in the U.S. The reporting requirements impact both domestic and foreign businesses.

What’s a Reporting Company?

Most companies operating in the US are Reporting Companies. A Reporting Company includes any C Corp, LLC, or similar entity created by filing with a state or tribal office, excluding specific Exempt Entities (see table below of entity types exempt from reporting).

What’s a Beneficial Owner?

A Beneficial Owner is an individual who either a) exercises substantial control over or b) owns at least 25% of the Reporting Company. Reporting Companies will often have more than one Beneficial Owner, and there is no maximum number of Beneficial Owners a company has to report.

When do Reporting Companies have to comply with the CTA?

The new CTA requirements went into effect on January 1, 2024:

• Entities formed or registered on or after January 1, 2024, must comply within 90 days of formation.
• Entities existing before January 1, 2024 have until January 1, 2025, to comply.

What information do Reporting Companies need to file?

Reporting Companies must provide information about their Beneficial Owners and Company Applicants. Changes or inaccuracies must be reported within 30 days. Information includes:

• Full legal name
• Date of birth
• Residential address (the address does not have to be a U.S. address)

Reporting Companies must also provide unique identifying numbers and issuing jurisdiction from, and image of, one of the following non-expired documents:

• State driver’s license
• U.S. passport
• Identification document issued by a state, local government, or Native American tribe
• If individual does not have any of the foregoing, a foreign Passport

Do Reporting Companies have to file annually?

No, there is no annual filing requirement. However, companies must file an updated BOI report within 30 days after any change occurs in the company’s information or beneficial owners that were previously reported.

How do Reporting Companies file with FinCEN?

First, Reporting Companies must gather all information and identifying documents from their Beneficial Owners. Then companies can complete the PDF or online form(s) and submit them at the FinCEN portal.

Is there an easier way for Reporting Companies to file with FinCEN?

AngelList offers a Beneficial Owner Information Filing automation. You can learn more about it here: https://www.angellist.com/blog/cta-beneficial-owner

What does ‘Substantial Control’ mean?

Substantial control is defined as any individual that is a senior officer; has authority to appoint or remove certain officers or a majority of directors/managers of the Reporting Company; is an important decision-maker; or has any other form of substantial control over the Reporting Company.

Ownership Interest Explained

Ownership interests are broadly defined, including equity, capital interests, convertible instruments such as SAFEs, and various financial arrangements.

Company Applicant Identification

A Company Applicant is an individual responsible for filing formation or registration documents, with specific criteria for both U.S. and foreign entities. This summary provides a general outline of the CTA, and is not legal advice. For detailed legal advice and compliance guidance, visit FinCEN and consult with professionals.

AngelList does not provide legal, tax, or financial advice of any kind. For legal advice specific to your company, please speak with an attorney. It is ultimately your responsibility to ensure that any filings are made in a timely and accurate manner. AngelList does not guarantee the accuracy or completeness of any filing made by you or on your behalf.