CTA: What Companies Must File? (Part 1: Reporting Company Definition)

The Corporate Transparency Act (CTA) will take effect 1/1/2024.  The law and its implementing regulations are overseen by the Financial Crimes Enforcement Network of the Treasury Department (FinCEN) and are intended to assist in money laundering and other criminal investigations. The law will require that “reporting companies” doing business in the US disclose their “beneficial owners” (BOs) to FinCEN unless they are exempt from reporting.  What, then, is a reporting company?  

The definition of “reporting company” is very straightforward.  For US entities, a reporting company is a corporation or LLC that was created via filing a document with a secretary of state (or similar office under state or Indian tribal law).  There is a similar definition for foreign companies who qualify to do business in the US via such a filing.  

Thus, if your US company is a corporation or an LLC that was formed via filing with your secretary of state, which is the usual route to forming a company, you must consider whether you are covered by the CTA. Likewise if your foreign company has registered to do business in the US.   

The reach of this law is therefore potentially very broad.  There are 23 exemptions to the law which we will cover in more detail in upcoming posts.  However, we anticipate that most small private companies in the US will be required to file: the exemptions largely cover publicly traded companies, financial vehicles and institutions, and large companies.  

What to Do Now

Reporting companies in existence before 1/1/2024 will have one year to file.  Newly formed companies (starting 1/1/2024) will have 30 days to file. If your company already exists, now is a good time to start gathering information about your ownership and governance (see prior posts Part 1 and Part 2) so that you are ready to identify your BOs to FinCEN.  If you plan to start a new company, or form any companies in 2024 for specific purposes, note that as part of the start-up and formation process, you will need to file your BO report within 30 days of formation.