Effective January 1, 2024, the Corporate Transparency Act (CTA) will require most private companies to disclose personal information about their beneficial owners, officers, and other decision makers to the Financial Crimes Enforcement Network (FinCEN).

Prior to the CTA, private companies provided relatively little information about their organization and governance to government agencies—especially in states like Delaware, which requires little more than the name of an entity and a modest annual filing fee to preserve entity status. But that is about to change. The stated objective of the CTA is to target drug traffickers, terrorists, tax evaders, and other criminals by requiring privately held companies to report to FinCEN information about who controls and benefits from such entities. These new rules become effective on January 1, 2024. New entities formed after that date will be required to comply immediately, but entities formed before January 1 will have one year to report. FinCEN estimates nearly 32.6 million companies will be subject to the reporting requirements in the first year, and about 5 million companies each year thereafter.

Before we go on, it is worth noting that these reports will by no means be available for public inspection. The CTA expressly exempts the required reports from search and disclosure under the Freedom of Information Act and similar state laws. Access to reports will be limited to federal and state law enforcement agencies, national security agencies, the Treasury Department, and financial institutions in connection with their anti-money laundering compliance obligations.

Who needs to report?

The CTA applies to “reporting companies,” which broadly includes any corporation, limited liability company, and any other similar entity that is formed by filing a document with a secretary of state’s office. However, the CTA creates numerous exemptions, primarily for those entities already subject to extensive federal reporting requirements, such as publicly traded companies, banks and securities brokers, investment companies and advisors, insurance companies, accounting firms, nonprofit entities, and political organizations.

The CTA also exempts companies that (1) report at least $5 million in gross receipts on their previous year’s federal tax return, (2) have an operating presence in a physical office within the U.S., and (3) employ more than 20 full-time employees in the U.S. Additionally, companies may be exempt depending on the nature of their parent company’s exemption.

What must be reported?

Reporting companies are required to report the identities of “beneficial owners” who own or control, directly or indirectly, 25% or more of the company or have “substantial control” over the company, including senior officers. For each such individual, a reporting company must report their (i) full legal name, (ii) date of birth, (iii) residential street address, (iv) a unique identifying number from a government-issued form of identification such as a US passport or a state-issued driver’s license, and (v) an image of that identifying document.

When is the deadline to comply?

Reporting companies formed or registered before January 1, 2024 must file their initial report by January 1, 2025. Reporting companies formed or registered during the 2024 calendar year must file their report within 90 days after formation or registration. And companies formed or registered after January 1, 2025 must file their report within 30 days after formation or registration.

Reporting under the CTA is an ongoing obligation. Companies that lose or gain exempt status (for example, by terminating or hiring employees and crossing the 20-employee threshold) must file an updated report within 30 days. Likewise, any changes in beneficial ownership information must also be reported to FinCEN within 30 days.

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At the end of the day, the actual reporting process should not itself be particularly onerous. FinCEN will be launching a secure online filing system accessed through its website. The real challenge for companies will be: (a) determining which entities the CTA applies to (business enterprises involving numerous subsidiaries, affiliates, and intermediary entities must evaluate each entity’s reporting obligations and navigate the complicated landscape of interplaying exemptions, only a few of which are discussed here); and (b) once filings have been properly submitted, ensuring that changes to that submitted information are reported within 30 days.

Companies will need to take critical inventory of their ownership and management structures to determine the extent of their obligations and should have in place a system to promptly notify FinCEN of any changes going forward.

The CTA can be accessed here.

The Treasury Department’s implementing regulations can be accessed here.

Note: This post was originally published in October 2023 and has been updated to reflect a final rule issued by FinCEN on November 29, 2023 extending reporting deadlines.