Understanding the Corporate Transparency Act’s Reporting Requirements

New reporting requirements for existing and new small business entities

The Corporate Transparency Act was enacted in 2021 to help combat money laundering by providing more transparency in entity structure ownership. The new Beneficial Entity Reporting requirement dates start in 2024 for “reporting companies.”  It is estimated that 32 million entities will be subject to the new reporting requirements.  

What is a Reporting Company? 

These include small corporations, limited partnerships, LLCs and limited liability partnerships that file with their secretaries of state offices. This includes single member LLCS that are formed to run a business or even owns a single rental property that are registered with your secretary of state office. It generally does not include general partnerships unless the state you are in requires registration with the state for existence. It also does not apply to tax-exempt entities. 

Self-employed individuals who have not formed an LLC or a corporation are not within the definition of a reporting entity and do not have to file a report.  Most general partnerships are not formed by filing with the secretary of state, however, some limited partnerships are formed by filing a document with a secretary of state office and would be required to file.   

What Information is Required to be Reported?   

Reporting companies must submit an online form with the Department of the Treasury’s Financial Crimes Enforcement Network (FINCEN). This form will capture the “beneficial owners” of the entity. Beneficial owners include individuals (not entities) who control 25% ownership of the entity or exercise substantial control over the entity. The definition of “substantial control” is broad and includes any Senior Officer. This includes the traditional C-Suite of executives – President, CEO, CFO, COO roles or “anyone else who acts in this capacity.” Information required to be reported include name, birth date, address and identification number (SSN or ITIN).   

When is the Report Due?   

*The company applicant is the individual that registered or formed the entity with the Secretary of State office or similar office. This may include the attorney who helped create the entity and the individual who filed the document with the secretary of state.  

Changes to any of the company information must be reported within 30 days of the change.  

What Happens if I Don’t File?   

The penalties for not filing are serious. Civil penalties up to $500 per day capped at $10,000 and criminal penalties may apply including up to two years in jail for willful disregard of the rules 

Are There Exceptions to Reporting?   

There are 23 exceptions to filing the report, but largely apply to industries that are already regulated (utilities, publicly traded entities, banks, etc.). The broadest exemption is for “large operating companies” – those with over $5 million in revenue in the prior year and employ more than 20 full-time employees and have a location in the United States. If you meet these criteria, your entity does not have to file.  

How Do I File?   

The forms and ability to file electronically can be found at the FInCen website.

What if I have questions?  

For most filers, the data to be reported is straightforward and will be an easy process. The FinCen website provides helpful guidance. If you need help determining if a person is a beneficial owner or if an exemption applies, this may require interpreting the legal rules of the Corporate Transparency Act – we recommend you consult your licensed attorney.