The United States Federal Corporate Transparency Act

A major shake-up in U.S. corporate disclosure laws is underway—are you ready? The Corporate Transparency Act (CTA), a key U.S. federal law, is evolving as legal challenges narrow its reporting requirements. This article breaks down what companies and their legal teams need to know, from determining whether they are affected to ensuring full compliance with the latest reporting requirements.

BACKGROUND ON CTA

The CTA went into effect on January 1, 2024, and was enacted as part of a larger effort to protect the U.S. financial system from illicit activities, such as money laundering, tax fraud and terrorism financing. Under the CTA, companies that qualify as “reporting companies” are required to report certain information about their “beneficial owners” to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury (the “Department”), by filing a beneficial ownership information report (BOIR). Authorized recipients (such as certain U.S. federal agencies, state governments and financial institutions) can request the information reported to FinCEN for the purposes of detecting, punishing and preventing the abovementioned illicit activities.

When the CTA became effective, both U.S. domestic companies and foreign companies were potentially subject to its reporting requirements. Unsurprisingly, numerous legal challenges were brought against the CTA, challenging its constitutionality. In light of such challenges and in compliance with Executive Order 14192, Unleashing Prosperity Through Deregulation, which was signed by President Donald Trump on January 31, 2025, the Department announced on March 2, 2025, in part, that the CTA’s reporting requirements would be narrowed to require only certain foreign companies to file a BOIR. On March 21, 2025, FinCEN issued an Interim Final Rule (the Rule) consistent with such announcement, only certain foreign companies would be required to file a BOIR.

COMPLIANCE

Determine Whether Subject to CTA

As mentioned above, “reporting companies” are required to file a BOIR with FinCEN. When the CTA became effective, the term “reporting companies” included both “domestic reporting companies” and “foreign reporting companies.” However, the Rule removed “domestic reporting company”; under the Rule, the term “reporting company” now only includes those companies previously defined as “foreign reporting companies”.

In accordance with the Rule, reporting companies are not required to report the beneficial ownership information of any U.S. person who is a beneficial owner of the companies. Additionally, the Rule exempts foreign companies that only have beneficial owners that are U.S. persons. Other exemptions are available for certain types of foreign companies that are already subject to extensive regulation and government oversight, such as large operating companies. A “large operating company,” as defined under the CTA, is any company that meets the following criteria:

1. Employs more than 20 full-time employees in the U.S. (where a full-time employee is generally defined as someone employed for an average of at least 30 hours per week).
2. Has an operating presence at a physical office within the U.S..
3. Reports more than $5,000,000 in gross receipts or sales on its previous U.S. federal income tax return (excluding income from foreign sources).

Identify Beneficial Owners

A reporting company must include information in the BOIR regarding each individual (excluding any U.S. person) who, directly or indirectly, either exercises substantial control over the company or owns or controls at least 25% of the company’s ownership interests.

An individual is considered to exercise substantial control over a reporting company if the individual:

1. Serves as a senior officer of the company, such as a President or Vice President.
2. Has authority over the appointment or removal of any senior officer or a majority of the board of directors (or similar body) of the company.
3. Directs, determines or has substantial influence over important decisions made by the company.

Under the CTA, “ownership interests” is defined broadly. For example, any equity of a company, instruments convertible into equity of a company, and put, call, straddle or other options to buy or sell equity of a company, are all considered ownership interests under the CTA. An individual may own or control an ownership interest of a reporting company through any contract, arrangement, understanding, relationship or otherwise. For example, an individual may be considered to own or control an ownership interest of a reporting company even though the individual owns or controls the ownership interest through a different entity (e.g., the individual is the sole owner of a company which is the sole owner of a reporting company). As mentioned above, under the Rule, U.S. persons who qualify as beneficial owners are not required to be listed on a BOIR.

Gather Information Required to be Included in a BOIR

The BOIR must include information regarding the reporting company, its beneficial owners (excluding any U.S. person) and, for certain reporting companies, the company applicant(s).

The following information must be reported for the reporting company:

• the company’s name (including any trade name or “doing business as” name)
• the current address from which the company conducts business in the U.S. (such as the reporting company’s U.S. headquarters)
• the foreign jurisdiction of formation of the company
• the U.S. jurisdiction in which it was first registered
• a tax identification number issued by the Internal Revenue Service (“IRS”) or, if the company has not been issued a tax identification number by the IRS, a tax identification number issued by a foreign jurisdiction and the name of such jurisdiction
•  

The following information must be reported for the reporting company’s beneficial owners (excluding any U.S. person):

• the beneficial owner’s full legal name
• date of birth
• current residential street address
• an identifying number from a passport or other approved document
• an image of the document that contains the identifying number

In addition to the above, reporting companies who registered to do business in the U.S. on or after January 1, 2024, must also report information regarding their “company applicant(s).” A company applicant is the individual who directly filed the registration document and, if different, the individual who was primarily responsible for directing the filing of the registration document. In general, the same information needs to be reported for a company applicant as for a beneficial owner.

Individuals who regularly register companies, as well as individuals who regularly direct registration of companies, should consider applying for a FinCEN identifier to limit the amount of information such individuals must provide each time a company for which they were the company applicant files a BOIR. The 12-digit FinCEN identifier of the company applicant may be included in the BOIR in lieu of all the information required to be included for the company applicant (such as full legal name, date of birth, etc.).

Deadline to File the BOIR

A reporting company registered before March 26, 2025, must file a BOIR no later than April 25, 2025.

A reporting company registered on or after March 26, 2025, must file a BOIR within 30 calendar days of the earlier of the date on which it receives actual notice that it has been registered to do business or the date on which a secretary of state or similar office first provides public notice that the reporting company has been registered to do business.

Update BOIR as Necessary

A reporting company’s obligations under the CTA do not end with the filing of a BOIR. Once a reporting company has filed a BOIR, such company has an obligation to file an update to the BOIR within 30 days of any change to the information that was included in the BOIR.

PENALTIES FOR NONCOMPLIANCE

Reporting companies that fail to file or update their BOIR by the applicable deadline are subject to penalties, including up to $10,000 in fines and 2 years in U.S. federal prison.

CONCLUSION

The CTA may no longer impose burdens on U.S. domestic companies, but it is still expected to significantly affect foreign companies. The attorneys at Dvorak Law Group are actively tracking updates from the Department on the CTA and are ready to provide expert guidance on the latest developments and how they could impact your business.

Aaron Jansen (ajansen@ddlawgroup.com) and Daniel Florance (dflorance@ddlawgroup.com)