Corporate Transparency Act

On January 1, 2024, the Corporate Transparency Act (“CTA”) became effective U.S. law. The CTA requires small domestic businesses and foreign businesses conducting business in the U.S. to report Beneficial Owner Information (“BOI”) to the Financial Crimes Enforcement Network (“FinCen”) regarding the business and its beneficial owners, i.e., the individuals who ultimately own and/or control the company.

FinCen collects the BOI to combat various criminal activities who utilize shell companies to engage in money laundering, drug trafficking, and terrorism., FinCen will share the BOI information with law enforcement and regulatory authorities upon a valid request from such authorities. Significant civil and criminal penalties may apply for willful failure to report or the submission of fraudulent reports.

To avoid such civil and criminal penalties it is important to act in and be able to show good faith compliance with the Corporate Transparency Act.

Explaining the CTA involves six Major areas: (1) Reporting Companies; (2) Beneficial Owners; (3) Business Applicants; (4) BOI information provided and FinCEN reports; (5) deadlines to report; and (6) Corrected/ Updated Reports.

First, “[a] reporting company is any corporation, limited liability company, or other similar entity that was created in the United States by the filing of a document with a secretary of state or similar office [i.e., a domestic reporting company], or any legal entity that has been registered to do business [in the United States].” There are important exemptions for numerous types of businesses, e.g., more than $5,000,000 in gross receipts or sales and more than 20 full-time employees. The point of the CTA is to get information about smaller businesses that are not already reporting information about themselves.

Second, beneficial Owners include “any individual who, directly or indirectly, either exercises substantial control over a reporting company or owns or controls at least 25% of the ownership interests of a reporting company or “an individual who exercises substantial control over a reporting company if the individual meets any of four general criteria: (1) the individual is a senior officer; (2) the individual has authority to appoint or remove certain officers or a majority of directors of the reporting company; (3) the individual is an important decision-maker; or (4) the individual has any other form of substantial control over the reporting company.”

A trustee, a settlor and a trust beneficiary can be characterized as beneficial owners of an LLC or corporation if the trust owns or controls at least 25% of the ownership interest in the reporting company.

Third, Business Applicants include any person who filed the document with the secretary of state to create a domestic corporation or register a foreign corporation or any person primarily responsible for directing or controlling such filing. A company has at least one business applicant and sometimes two business applicants where a second person is involved in a supervisory role. For domestic and foreign corporations created or registered prior to January 1, 2024, the BOI report does not include the business applicant information.

Fourth, each BOI report must include information about the Reporting Company, its Beneficial Owners and its Business Applicants, as follows:
(1) The Reporting Company must report –
a. company’s full legal name and trade names (e.g., d/b/a’s);
b. complete business address;
c. jurisdiction of formation;
d. jurisdiction of registration (foreign companies); and
e. the company’s taxpayer identification number, including an employer identification number.

(2) Beneficial Owners and Business Applicants must report the following to FinCEN:
a. their full legal name;
b. date of birth;
c. street address of residence (or business for business applicants);
d. unique identifier number from a recognized issuing jurisdiction; and
e. an image (copy) of that identification document (e.g., passport or driver’s license).

Five important exceptions to the Business Owner rule exist for (1) minors, (2) nominees, intermediaries, custodians or agents of business owners, (3) reporting company employees (other than senior officers), (4) inheritors with future interests in the reporting company, and (5) creditors of the reporting company. These are discussed in FinCEN’s, “Small Entity Compliance Guide”.

An individual or business has the option to file their information directly with FinCEN by first, obtaining a “FinCEN identifier.” The FinCEN identifier is then reported by the Reporting Business on its BOI report instead of the business owner’s information. The use of a FinCEN identifier number facilitates the BOI reporting process by making the owners responsible for directly reporting their information to FinCEN and, importantly, keeping that information current with updated BOI reports. Reporting companies are likely to require their business owners to obtain FinCEN identifiers to shift the burden of updating reports related to changes in the business owner’s information.

A reporting company is expected to report the BOI information to FinCen by means of a secure portal on FinCen’s website. The portal began accepting BOI Reports on January 1, 2024.

Fifth, existing businesses have one year to file their first BOI report. Businesses that are established between January 1, 2024 and January 1, 2025, have ninety (90) days to file their report (measured from the date they were incorporated or allowed to do business); and business established, or allowed to do business in the US after January 1, 2025, have thirty (30) days to file their BOI report.

Sixth, BOI reports are not filed on an annual basis but must be corrected or updated, as relevant, within 30 days of the learning about an error in a filed document or a change in reported information.

However, if a business owner has a FinCEN number then the burden is directly on the owner to update his or her information.
For further information, resources, and technical assistance visit FinCen’s website,

The foregoing brief discussion is not legal advice. Consult a qualified attorney or accountant for guidance. Dennis A. Fordham, attorney, is a State Bar-Certified Specialist in estate planning, probate and trust law. His office is at 870 S. Main St., Lakeport, Calif. He can be reached at and 707-263-3235.

“Serving Lake and Mendocino Counties for nineteen years, the Law Office of Dennis Fordham focuses on legacy and estate planning, trust and probate administration, and special needs planning. We are here for you. 870 South Main Street Lakeport, California 95453-4801. Phone: 707-263-3235.”