The Corporate Transparency Act (CTA) passed in 2021 to combat illicit activity such as money laundering, tax fraud, and terrorist financing. Under the statute, certain individuals who meet a specific threshold of ownership interest or exercise substantial control over a business deemed to be a “reporting company” as defined by the CTA are required to submit a Beneficial Ownership Information (BOI) Report to the Financial Crimes Enforcement Network (FinCen).

The Corporate Transparency Act (CTA) sets forth comprehensive requirements, targeting entities that filed their formation documentation with the Secretary of State in any U.S. state or territory. This typically encompasses:

• Domestic Reporting Companies: LLCs, corporations, and similar operations, formed under the laws of any U.S. state or Indian tribe
• Foreign Reporting Companies: Certain non-U.S. entities registered to do business in any state or tribal jurisdiction are also required to file

The Corporate Transparency Act (CTA) carries significant implications for private investment vehicles as BOI requirements have a narrow field of “exempted” companies, necessitate disclosure based on ownership (25%+ direct or indirect equity interest) or substantial control (including management and board of director influence).

• SEC-Reporting companies
• Regulated financial services companies, including banks, credit unions, depository institution holding companies, registered securities broker-dealers, registered investment companies and investment advisers, venture capital fund advisers, and pooled investment vehicles that are operated or advised by the foregoing
• Insurance companies
• PCAOB-registered accounting firms
• Tax-exempt entities
• Subsidiaries of certain exempt entities
• Entities that employ more than 20 full-time employees in the U.S., have an operating presence at a physical office in the U.S., and demonstrate more than $5 million in gross receipts or sales on their federal income tax return (excluding receipts/sales from sources outside the U.S.). If a company falls below these thresholds in the future, a BOI report must be filed within 30 days
• Inactive entities that existed before January 1, 2020, are not engaged in active business, are not owned by a foreign person, have not had a change in ownership in the last 12 months, have not sent or received funds greater than $1,000 in the last 12 months, and do not hold any assets

A “Beneficial Owner” of a Reporting Company is defined as any individual who directly or indirectly:

1. Exercises substantial control over a Reporting Company, including Senior Officers or others with important decision making authority via:

• Board Representation.
• Ownership or control of a majority of voting power or rights.
• Rights associated with financing or interest (e.g., warrants, convertible instruments, etc.).
• Controlling one or more intermediary companies (i.e., indirect control) that separately or collectively exercise substantial control over a Reporting Company.
• Through arrangements or financial or business relationships with other individuals or companies acting as nominees.

2. Owns or controls at least 25% of the ownership interests of a Reporting Company via:

• Joint ownership with one or more other persons of an undivided interest in an ownership interest.
• Equity, stock, or voting rights; a capital or profit interest; convertible instruments; options or other non-binding privileges to buy or sell any of the foregoing; and any other instrument, contract, or other mechanism used to establish ownership.
• Owning or controlling one or more intermediary companies (i.e., indirect ownership) that separately or collectively own or control ownership interests of a Reporting Company.
• Through another individual acting as a nominee, intermediary, custodian, or agent.

The due date for the initial BOI report depends on when the entity was created.

• If the company is created on or after January 1, 2024, then the initial report is due within 90 calendar days of the date the entity is created.
• If the company was formed before January 1, 2024, then the initial report is due no later than January 1, 2025.

BOI Reports include information about the reporting company, the reporting company’s beneficial owners, and “company applicants” who assisted with the filings to create the entity. Information about the reporting entity include:

• Full legal name
• Any trade name or “doing business as”
• Current address
• Jurisdiction of formation
• Federal taxpayer ID number

Information about the beneficial owners and company applications includes:

• Full legal name
• Date of birth
• Current address
• Unique identifying number and issuing jurisdiction (e.g. US passport or driver’s license)
• Image of documentation OR
• A unique FinCEN ID obtained by the beneficial owner from FinCEN’s website.

If there is any change to the required information about your company or its beneficial owners in a BOI report that your company filed, your company must file an updated BOI report no later than 30 calendar days after the date on which the change occurred.

Some examples of changes that would require an updated BOI Report:

• Change in information of the reporting company, such as a change of address or registering a new DBA.
• Change in beneficial owner, such as a new senior officer or a adding/removing a 25% owner due to a sale or additional fundraising.
• Any change to existing beneficial owners information such as address, name, or unique identifying number.