The Corporate Transparency Act (CTA) requires “reporting companies” to report certain beneficial ownership information (BOI) to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) in order to enhance corporate transparency in the United States.

As part three of a series highlighting the material provisions of the CTA, this article discusses the necessary information for any beneficial ownership report in order to assist businesses with CTA compliance.

What Reporting Companies Must Report

Reporting companies are required to report the following information regarding their entity to FinCEN: (1) name of the company, including any trade name or “doing business as” name; (2) business street address; (3) state of formation; and (4) IRS Taxpayer Identification Number. 

Reporting companies are required to report similar information regarding their beneficial owner(s) and company applicant(s), which are discussed below.

Definition of “Beneficial Owner”

The CTA requires all reporting companies to report certain information about their “beneficial owners.” Beneficial owners include individuals meeting the following criteria: (1) those who exercise substantial control over the reporting company, such as senior officers, individuals with authority to appoint or remove senior officers or board members, and those with substantial influence over important decisions; and (2) those who own or control at least 25% of the ownership interests of the reporting company. The Final Rules indicate that reporting companies should always identify at least one beneficial owner. Despite the use of the term “beneficial owner,” reporting companies should understand that the term is quite broad and will likely include non-owners who play a critical role in decision-making in an organization, and the determination of beneficial ownership may be more complex and less straightforward than expected.

Reporting companies must report the following information for each of their beneficial owners: (1) legal name; (2) date of birth; (3) residential or business street address; (4) a unique identifying number from an acceptable identification document (U.S. passport, non-expired state ID, non-expired driver’s license, or, if none of these, non-expired foreign passport); and (5) an image of such document. 

Definition of “Company Applicant”

Reporting companies formed on or after January 1, 2024, but not those formed or registered prior to this date, must report information about their “company applicants.”  Company applicants include (1) the individual who directly files the document to create or register the reporting company and (2) if more than one individual is involved in the filing, the individual who is primarily responsible for directing or controlling such filing. The Final Rules limit the definition of “company applicants” to include at most two individuals per reporting company. 

With respect to company applicants, reporting companies must report the same five pieces of information as required for their beneficial owners, but a business street address may be reported for a company applicant that forms an entity as part of the company applicant’s job at such business.

FinCEN Identifiers

To streamline reporting, individuals and reporting companies can obtain a FinCEN Identifier, which is a unique identifying number issued by FinCEN, through an online application. FinCEN Identifiers will simplify the process by allowing reporting companies to simply report each individual’s unique identifying number to FinCEN; however, individuals and reporting companies must maintain correct information in connection with their FinCEN identifier (such as a change of address). An individual’s application for a FinCEN Identifier will require the same five pieces of information discussed above.

Next Steps

Any “reporting company” should establish procedures to identify and verify the beneficial owners, maintain accurate records, and submit timely reports as required under the CTA. Considering FinCEN’s broad interpretation of “substantial control” and “ownership interests,” and in light of the apparent legislative intent to require disclosure, reporting companies with more complex ownership structure may want to consider consulting with a legal or other professional well-versed in the CTA to assist in determining which individuals must be reported as beneficial owners. 

For more information, FinCEN issued a helpful Small Entity Compliance Guide in December 2023, which you may access by clicking here, and continues to provide helpful guidance through its Frequently Asked Questions, which you may access by clicking here. FinCEN has also created a webpage for Beneficial Ownership Information (here) and reports may access the BOI E-Filing system (here) if you would like to file your report yourself. You may also contact your Burr & Forman attorney with any questions, for assistance with filing, or for more information about the issues discussed in this Alert.

Click here to read Part I and here to read Part II.