The Corporate Transparency Act Guide

A Full Guide to Compliance with the Corporate Transparency Act

Generally

The Corporate Transparency Act (“CTA”) requires certain entities to file a Beneficial Ownership Information Report (“BOI Report”) with the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of the Treasury. The CTA was enacted to help the federal government combat financial crimes, including money laundering.

Unless an entity qualifies for an exemption, it must submit a BOI Report. Entities subject to this requirement are referred to as “Reporting Entities.”

The BOI Report must include information about the Reporting Entity and its Beneficial Owners (as defined below). Additionally, if the Reporting Entity was formed on or after January 1, 2024, the report must also include details about its Company Applicants (as defined below).

BOI Reports can be completed and submitted online at: FinCEN BOI Filing Portal.

Deadlines

January 1, 2024: FinCEN began accepting BOI Reports.

March 21, 2025: Deadline for Reporting Entities formed before January 1, 2024, to submit their BOI Reports.

• Note: The deadline may be extended again. On February 10, 2025, the House unanimously passed the “Protect Small Businesses from Excessive Paperwork Act of 2025.” The bill is currently under review in a Senate committee. If enacted, the deadline to file a BOI Report will be extended to January 1, 2026—but only for Reporting Entities formed before January 1, 2024.

90 days: Timeframe for Reporting Entities formed between January 1, 2024, and December 31, 2024, to file a BOI Report after formation.

30 days: Timeframe for Reporting Entities formed on or after January 1, 2025, to file a BOI Report after formation.

30 days: Timeframe for a Reporting Entity to update its BOI Report:

• To reflect changes in the Reporting Entity or one of its Beneficial Owners.
  • Example: If a Reporting Entity or a Beneficial Owner changes their primary address, a supplemental BOI Report must be submitted within 30 days of the address change.
• To correct inaccuracies in a previously submitted BOI Report.
  • Example: If an incorrect address was listed in the original BOI Report, a corrected report must be submitted within 30 days.

FinCEN recently announced that it is considering further deadline extensions to ease regulatory burdens, focusing on entities with the highest national security risks. It also plans to revise the BOI reporting rule this year to reduce requirements for lower-risk entities, including many small businesses.

Penalties for Failure to Comply

Failure to comply can result in civil and criminal penalties, including:

• Fines up to $10,000, imprisonment for up to 2 years, or both for anyone who willfully:
  1. Submits or attempts to submit a false or fraudulent BOI Report.
  2. Fails to report, update, or correct an incomplete or outdated BOI Report.

• • Note: The definition of “willfully” is unclear, so it’s best to err on the side of caution.

• Penalties may apply to both Reporting Entities and individuals who:

• • Cause a Reporting Entity not to file a required BOI Report.
  • Are Senior Officers (e.g., CEO, CFO, COO, General Counsel) at the time of the entity’s failure to comply.

Is my Company a Reporting Entity?

Your company is a Reporting Entity if:

• It is a U.S. LLC or Corporation formed by filing with a secretary of state, unless an exemption applies.
• It was formed through an Indian tribe, the District of Columbia, or a U.S. Commonwealth—these do not provide exemptions from the CTA.
• Additional rules apply if your company is foreign (non-U.S.).

Exemptions

If your company qualifies for one of the following exemptions, it is not considered a Reporting Entity and does not need to file a BOI Report.

In most cases, exemptions do not apply unless your company is:

• Tax-exempt
• A governmental entity
• Part of the financial, insurance, accounting, or public utility industries

There are two notable exceptions to this general rule. If your company does not fall into one of these categories, it is likely not exempt from CTA requirements.

Notable Exemptions

The Large Operating Company Exemption

• A company qualifies for this exemption if it meets all of the following criteria:
  • Employs more than 20 full-time employees in the United States.
    • Note: Employees of subsidiaries do not count toward this total.
  • Has a physical office in the United States.
    • Note: A P.O. Box or a personal residence does not qualify as a physical office.
  • Had more than $5,000,000 in gross receipts or sales in the previous year.
    • Note: Must be from U.S. sources and reported in IRS filings.
    • Note: Companies formed after January 1, 2024, do not qualify initially but may claim the exemption later, at which point they are no longer required to update their BOI Report.

The Inactive Entity Exemption

• Even if a company is inactive, it must still file a BOI Report unless it meets all of the following requirements:
  • Existed on or before January 1, 2020;
  • Is not actively engaged in business;
  • Is not owned, in whole or in part, by a foreign person;
  • Has not changed ownership in the past 12 months;
  • Has not sent or received more than $1,000 in the past 12 months; and
  • Does not hold any assets, in the U.S. or abroad, including ownership interests in any entity.

Remaining Exemptions

Your company may be exempt from the Corporate Transparency Act (CTA) if it falls into one of the following categories:

• A securities reporting issuer,
• An entity empowered with governmental authority,
• A bank,
• A credit union,
• A depository institution/holding company,
• A money transmitting business,
• A securities broker/dealer,
• A securities exchange/clearing agency,
• A company otherwise registered with the Securities and Exchange Commission,
• An investment company/advisor,
• A venture capital fund advisor,
• An insurance company,
• A state-license insurance producer,
• A company otherwise registered with the Commodity Futures Trading Commission,
• A public accounting firm,
• A company providing public utility services,
• A financial market utility,
• A pooled investment vehicle,
• A tax-exempt entity,
• An entity assisting a tax-exempt entity, or
• A subsidiary of certain exempt entities.

What and Who is a Beneficial Owner?

A “Beneficial Owner” is any individual (there can be more than one, but there will be at least one) who, directly or indirectly:

• Exercises “Substantial Control” over a Reporting Entity, or
• Owns or controls at least 25% of the Reporting Entity’s “Ownership Interests.”

What is Substantial Control?

There is no strict definition of substantial control, but an individual is generally considered to have substantial control over a Reporting Entity—and is therefore a Beneficial Owner—if they:

• Hold a Senior Officer position in the entity.
  • Note: This includes, but is not limited to, the President, CFO, General Counsel, CEO, COO, or any officer with similar functions.
• Have the authority to appoint or remove a Senior Officer or a majority of the board of directors.
• Direct, determine, or significantly influence key business, financial, or structural decisions of the entity, such as:
  • Entering into or terminating significant contracts;
  • Selling or transferring principal assets;
  • Making major expenditures or investments;
  • Reorganizing, dissolving, or merging the entity; or
  • Amending the entity’s governing documents.

Indirect Control

An individual may also exercise substantial control indirectly, such as:

• Controlling one or more intermediary entities that, separately or collectively, control the Reporting Entity.
• Exerting influence through arrangements, financial interests, or business relationships with other individuals or entities acting as nominees.

Note: Since there is no strict definition of substantial control, an individual may still qualify even if they do not fit these specific characteristics.

What is an Ownership Interest?

An ownership interest in a Reporting Entity may include any of the following:

• Equity, stock, or voting rights;
• Capital or profit interest;
• Convertible instruments, including:
  • Any instrument that can be converted into equity, stock, voting rights, or a capital/profit interest—regardless of whether payment is required to exercise conversion.
  • Related instruments, such as:
    • Futures on convertible instruments; or
    • Warrants or rights to purchase, sell, or subscribe to shares or interests in equity, stock, voting rights, or capital/profit interests—even if structured as debt.
  • Options or privileges, including:
    • Any put, call, straddle, or other option to buy or sell equity, stock, voting rights, capital/profit interests, or convertible instruments.
    • Exception: This does not apply if the option or privilege was created and held by others without the knowledge or involvement of the Reporting Entity.
  • Any other instrument, contract, arrangement, understanding, relationship, or mechanism used to establish ownership.

Indirect Ownership Interests

An individual or entity may also indirectly own or control a Reporting Entity’s ownership interests through:

• Intermediary entities – Owning or controlling one or more entities that, separately or collectively, own or control the Reporting Entity’s ownership interests.
• Nominees, intermediaries, custodians, or agents – Holding ownership interests through another individual or entity acting on their behalf.

Beneficial Owner Exceptions

In certain cases, a Beneficial Owner does not need to be reported in a Reporting Entity’s BOI Report. However, for some exceptions, a substitute individual must be identified instead.

An individual is not required to be reported as a Beneficial Owner if they are:

• A minor child;
  • Note: In this case, the minor’s parent or legal guardian must be listed instead.
• A nominee, intermediary, custodian, or agent acting solely on behalf of a Beneficial Owner;
• An employee, if:
  • They work under the direction and control of an employer who can terminate them;
  • Their ownership interest or control is based only on their employment status; and
  • They are not a Senior Officer.
• An inheritor; and
  • Note: Their only interest in the Reporting Entity is a future right through inheritance.
• A creditor.
  • Note: Their interest is limited to receiving payment of a predetermined sum (e.g., debt, loan covenant, or similar rights) and does not confer ownership or control.

What and Who is a Company Applicant?

A Company Applicant is the individual responsible for filing the documents necessary to form a Reporting Entity. This information is only required in the BOI Report for Reporting Entities formed on or after January 1, 2024.

For these entities, FinCEN requires at least one and at most two Company Applicants.

Who Qualifies as a Company Applicant?

A Company Applicant must be an individual, not a business entity. There are two categories:

• The Direct Filer (Required)
  • The individual who physically submitted the document that created the Reporting Entity.
  • Example: The person who filed the Articles of Organization with the Secretary of State to form an LLC.
• The Director/Controller of the Filing (If Applicable)
  • The individual primarily responsible for directing or overseeing the filing process.
  • Example: If an employee submitted the formation documents under the direction of an officer, the employee would be the Direct Filer, and the officer would be the Director/Controller—both should be listed as Company Applicants.

What Information Should Be Included in the BOI Report?

Reporting Entity Information

• A BOI Report must include the following details about the Reporting Entity:
  • Full legal name;
  • Any trade name or “Doing Business As” (DBA) name;
  • Complete current address of its principal place of business;
  • Jurisdiction (state) of formation; and
  • Tax identification number.

Beneficial Owner & Company Applicant Information

• For each Beneficial Owner and Company Applicant (if the entity was formed on or after January 1, 2024), the following must be provided:
  • Full legal name,
  • Date of birth,
  • Complete current address,
  • Unique identifying number from:
    • S. passport;
    • Driver’s license;
    • Another identification document issued by a state, local government, or tribe; or
    • Foreign passport (if none of the above are available)
  • A photo of the document from which the unique identifying number originated.

FinCEN Identifier (FinCEN #)

• Once an individual or entity’s information is included in a BOI Report, it is stored in FinCEN’s database, and a FinCEN # is assigned.
  • In future BOI Reports, instead of re-entering the individual/entity’s details, the FinCEN # can be used.

BOI Updates/Corrections

Updating a BOI Report

• If any information regarding the Reporting Entity or its Beneficial Owners changes, the Reporting Entity must submit an updated BOI Report within 30 days of the change.
  • Example: If the Reporting Entity or a Beneficial Owner moves or a Beneficial Owner obtains a new driver’s license, an update is required.
  • Important: The 30-day deadline begins on the date of the change, not when the Reporting Entity discovers the change.
• Company Applicant information does not need to be updated, as long as it was accurate at the time of the original BOI Report submission.

Correcting Errors in a BOI Report

• If any information in the BOI Report is incorrect or a Beneficial Owner was omitted, the Reporting Entity must submit a corrected BOI Report within 30 days of the initial submission.
• This correction deadline applies to all errors, including those related to the Company Applicant.

Questions?

Have further questions about the Corporate Transparency Act beyond what’s covered in this compliance guide? Reach out to the Merritt Law team.