The CTA requires companies formed or registered to do business in the U.S. to file a beneficial ownership report with FinCEN. These beneficial ownership reports will allow FinCEN to assemble a database of beneficial owners. Companies are required to provide data about both the companies and their beneficial owners and applicants, including full legal name, address, state of formation, IRS taxpayer identification number, birth date, and other details.
FinCEN will use its database to fight money laundering in cooperation with other U.S. law enforcement agencies. Although the records will not be publicly available, the database will be accessible to U.S. law enforcement agencies, U.S. financial institutions and some non-U.S. law enforcement agencies.
The law defines “beneficial owner” as any individual who, directly or indirectly, either (a) exercises substantial control over the reporting company or (b) owns or controls at least 25 percent of the ownership interests of the reporting company.
The CTA has penalties for non-compliance. A reporting company that does not file a beneficial ownership report (or a required amendment) when due is subject to a $500 per day fine up to a maximum of $10,000. A willful failure to file a report when due or an intentional filing of inaccurate information is punishable as a felony by up to two years imprisonment. A willful violation in combination with other anti-money laundering violations can result in a bigger penalty of up to ten years imprisonment.
To file the notice, one needs to have the EIN or ITIN number for the company, and a passport or driver’s license number for the beneficial owner. To file a report and for more information go to: Link.
However, on March 1, 2024, a federal district court in the Northern District of Alabama, in National Small Business United v. Yellen, held that the CTA exceeds the Constitution’s limits on Congress’s power and enjoined the Department of the Treasury and FinCEN from enforcing the CTA against the plaintiffs in that case. The Justice Department is appealing the decision. Note the decision only applies to the plaintiffs and members of the National Small Business Association.
New York State has also enacted its own beneficial information disclosure law, the NYLTA) for limited liability companies. The law does not apply to corporations or other entities. LLCs that are exempt need to file a Statement of Exemption. It will become effective as of Jan. 1, 2026, and it allows both domestic and foreign LLCs to submit to the New York Department of State a copy of their initial federal BOI report filed with the FinCEN, if the report contains all necessary information required by the NYLTA.