Corporate Transparency Act: Who is a “Beneficial Owner?” and Who is a “Company Applicant”?

In 2021, the Corporate Transparency Act was passed, requiring most corporations and LLCs to file information about their “beneficial owners” with the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of Treasury. 

The filing requirements were delayed for three years while the regulations were written and finalized.  Now the law is taking effect.

Starting on January 1, 2024, newly formed or registered reporting companies in the U.S. will have 90 days to report BOI, certain entity information about the reporting company and company applicant information to FinCEN.

The Corporate Transparency Act requires certain entities to file information on their owners and top-level officers to help fight money-laundering, tax evasion and other corrupt financial activities.

Many small businesses (called “Reporting Companies” in the act) are going to have to file this information with the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of Treasury

A reporting company must report:

• the full legal name

• all trade names

• current residential address

• date of birth

• driver’s license/passport/state or tribal identification document information and image of the company’s “beneficial owners.”

Beneficial owners are:

• Anyone who owns or controls (directly or indirectly) at least 25% of a company.  This includes people who have capital or economic interests and not just voting interests; or

• Anyone who exercises substantial control over a reporting company.  This includes senior officers, such the president, chief executive officer (CEO), chief operating officer (COO) chief financial officer (CFO), general counsel, of a corporation or a manager of an LLC. This is an expansive category that focuses on job duties and not titles. 

The following are not considered beneficial owners of a reporting company:

• Minor children (however, the reporting company must report information regarding the minor child’s parent or legal guardian)

• An individual acting as a nominee, intermediary, custodian, or agent on behalf of another individual (in which case that individual would be the beneficial owner)

• An employee of the reporting company, acting solely as an employee, whose substantial control over or economic benefits from the entity are derived solely from the employment status (provided that the person is not a senior officer of the entity)

• An individual whose only interest in a reporting company is a future interest through a right of inheritance

• A creditor of the reporting company

In addition, reporting companies created on January 1, 2024 and after have to report the full legal name, current residential address, date of birth,  and driver’s license/passport/state or tribal identification and image of the “Company Applicant.”

There can be up to two Company Applicants.

Company applicants are:

• The individual who directly files the document that creates or registers the company (typically either the company founder or its attorney); and

• If more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing (typically the founder).

Here is the Small Entity Compliance Guide  from FinCEN.