Under the Corporate Transparency Act (CTA), millions of companies that are registered to do business in the United States are now required to submit a report containing beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). Parasec has compiled a Frequently Asked Questions (FAQs) section to help our clients navigate this compliance requirement.
Additionally, we have created an informational sheet to help reporting companies identify who qualifies as a beneficial owner (find it here). You can also access our BOI Filings Prep Checklist here. Compiling the documents you need for your BOI filing(s) before you start can help streamline the process. Additonally, the Trusts & BOI Reports document we’ve created outlines key considerations for trusts under the CTA.
What is the latest news about the CTA and BOI reports?
The legal status of the Corporate Transparency Act (CTA) has been uncertain, leaving many business owners, attorneys, and tax professionals unsure about their obligations. As of February 19, 2025, beneficial ownership information (BOI) reporting requirements were officially reinstated.
However, on March 2, 2025, the Treasury Department announced a major change to the enforcement and scope of the CTA’s BOI reporting rules.
Key Updates:– The Treasury Department will not enforce penalties or fines related to BOI reporting under the current regulatory deadlines.– Once upcoming rule changes take effect, U.S. citizens, domestic reporting companies, and their beneficial owners will no longer be subject to BOI reporting requirements or penalties.– The Treasury Department plans to issue a proposed rule narrowing BOI reporting requirements to apply only to foreign reporting companies.
These changes are intended to ease the regulatory burden on small businesses and better align the rules with the public interest.
Additional details will be available once the proposed rule is released. You can read the official press release here.
What companies are required to file a BOI report with FinCEN?
Companies that are required to report are called “reporting companies.” FinCEN identifies two types of reporting companies:
- Domestic reporting companies: Corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
- Foreign reporting companies: Entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.
For those impacted, the rule breaks down reporting companies into two categories: Those formed before January 1, 2024, and those formed after December 31, 2023. While both types are subject to reporting requirements, the information that needs to be submitted varies slightly depending on the category.
If my entity is registered in one state and qualified to do business in other states do I need to file a BOI for each state where it operates?No. Authorizing a foreign reporting company (already registered under the laws of one state or tribe) to do business under the laws of another state or tribe does not necessitate the filing of additional BOIRs.
Are there any exemptions? There are 23 types of entities that are exempt from the beneficial ownership information reporting requirements. Those exempt entities are primarily those already more heavily regulated (i.e. financial institutions, public utilities, charities, accounting firms, etc.). Additionally, large reporting companies—those with over 20 full-time employees (in the U.S.) and with $5 million in gross receipts for the prior year—are also exempt. Finally, any entity that is not actively engaged in business, that does not own a subsidiary entity, and has not sent or received funds over $1,000 is also exempt. It’s important to carefully review the criteria before making the determination your company is exempt.
Please note: Most early-stage and newly formed companies are likely to be reporting companies, as they are unlikely to meet any of the exemptions within the first 90 days of forming.
What has to be reported?
For reporting companies created before January 1, 2024, the beneficial ownership information (BOI) report must include information on the reporting company itself as well as the beneficial owners of the entity.
Reporting companies created on or after January 1, 2024 must also include information about the company applicants.
What information about the reporting company must be supplied?
Reporting companies must provide all of the information below:(1) The reporting company’s full legal name;
(2) Any trade names or “doing business as” names of the reporting company;
(3) A complete current address consisting of:
(a) the reporting company’s principal place of business in the United States; or
(b) in all other cases, the street address of the primary location in the United States where the reporting company conducts business;
(4) The State, Tribal, or foreign jurisdiction of formation of the reporting company;
(5) For a foreign reporting company, the State or Tribal jurisdiction where such company first registers; and
(6) The Internal Revenue Service Taxpayer Identification Number (TIN) of the reporting company, or for foreign reporting companies that have not been issued a TIN, a foreign tax identification number and the name of the relevant jurisdiction.
Who is a beneficial owner of a reporting company? Under the rule, a beneficial owner includes any individual who, directly or indirectly, (1) exercises “substantial control” over a reporting company, and/or (2) owns or controls at least 25 percent of the ownership interest of a reporting company.
The final rule clarifies in more detail the terms “substantial control” and “ownership interest.” Essentially, the rule captures anyone who can direct, determine, have substantial influence, or make important decisions on behalf of the entity. A reporting company may have only one beneficial owner or it could have multiple beneficial owners. Parasec has created an informational sheet to help reporting companies determine who qualifies as a beneficial owner. Find it here.
What information on the beneficial owners must be supplied? For each beneficial owner, the following information must be reported on:(1) Full legal name;
(2) Date of birth;
(3) A complete current address consisting of:
(3a) the individual’s residential street address; or
(3b) in the case of a company applicant who forms or registers an entity in the course of such company applicant’s business, the street address of such business;
(4) A unique identifying number from an acceptable identification document defined as:
(4a) a non-expired U.S. passport;
(4b) a non-expired identification document issued by a state, local government or Indian tribe;
(4c) a non-expired driver’s license issued by a state; or
(4d) if the individual does not possess any of the aforementioned documents, a non-expired foreign passport.
(5) An image of the document the unique identifying number came from.
Who is a company applicant? FinCEN defines company applicants as:
- The individual who directly files the document that creates or registers the company; and
- If more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing.
While the number of company applicants per reporting company will be limited to two or less, there is still some debate as to who to name if more than two people are involved in the formation/registration process. FinCEN has updated its definition to include a few scenarios that may be helpful when determining who is a company applicant. Below are three of the scenarios they have laid out:
Scenario 1: Consider an attorney who completes a company creation document using information provided by a client, and then sends the document to a corporate service provider for filing with a secretary of state. In this example:
- The attorney is the company applicant who is primarily responsible for directing or controlling the filing because they prepared the creation document and directed the corporate service provider to file it.
- The individual at the corporate service provider is the company applicant who directly filed the document with the secretary of state.
Scenario 2: If the attorney instructs a paralegal to complete the preparation of the creation document, rather than doing so themself, before directing the corporate service provider to file the document, the outcome remains the same: the attorney and the individual at the corporate service provider who files the document are company applicants. The paralegal is not a company applicant because the attorney played a greater role than the paralegal in making substantive decisions about the filing of the document.
Scenario 3: If the client who initiated the company creation directly asks the corporate service provider to file the document to create the company, then the client is primarily responsible for directing or controlling the filing, and the client should be reported as a company applicant, along with the individual at the corporate service provider who files the document.
For more on company applicants, visit Section E of FinCEN’s FAQs.
Again, only reporting companies created or registered on or after January 1, 2024, will need to report on their company applicants.
What information about the company applicants must be provided? For each company applicant (and there can be up to two), the following information must be provided:(1) Full legal name;
(2) Date of birth;
(3) A complete current address consisting of:
(3a) the individual’s residential street address; or
(3b) in the case of a company applicant who forms or registers an entity in the course of such company applicant’s business, the street address of such business;
(4) A unique identifying number from an acceptable identification document defined as:
(4a) a non-expired U.S. passport;
(4b) a non-expired identification document issued by a state, local government or Indian tribe;
(4c) a non-expired driver’s license issued by a