October 18, 2023

In September of 2022, Congress issued the final rule outlining the Corporate Transparency Act (hereinafter referred to as the “CTA” or the “Act”) which finds its roots in the enactment of the Anti-Money Laundering Act of 2020. The new federal law is aimed at combating financial crimes by increasing transparency around the beneficial ownership of various corporate entities.

The CTA requires certain businesses to disclose information about their beneficial owners to the Financial Crimes Enforcement Network (“FinCEN”) in order to prevent money laundering, tax evasion, and other illegal activities. The Act affects various business structures, including corporations, limited liability companies, and similar business vehicles.

It is important to discuss the key provisions that will affect our clients, the impact this will have on businesses, and how our Business Care team at Hargrove Firm can assist.

Key Provisions

Effective January 1, 2024, all businesses established on or after January 1, 2024, are required to report to FinCEN information about the beneficial owners of the entity, unless the entity is otherwise exempt. An important component of the Act applies retroactively and requires businesses in existence prior to January 1, 2024, to file a report with FinCEN prior to January 1, 2025.

Reports identify the beneficial owners of the entity, the person(s) who ultimately own or control the company, and provides information about the person(s) who formed or organized the entity. It is worth noting that FinCEN is authorized under the Act to disclose the information received to other government authorities and to financial institutions.

Who is required to report under the CTA?

Any domestic or foreign business entities that are created by or are registered with a secretary of state or similar office, including corporations and limited liability companies, among others may now have reporting requirements under the CTA. The Act potentially encompasses limited partnerships, limited liability partnerships, business or other statutory trusts, and general partnerships depending on the entity’s applicable state law.

The Act exempts governmental authorities, banks, credit unions, money services businesses, broker-dealers, securities reporting issuers, Securities Exchange Act registered entity, investment companies or investment advisors, venture capital fund advisors, insurance companies, Commodity Exchange Act registered entities, tax-exempt entities, large operating companies and certain subsidiaries, among others.

As you can see, there are several exemptions that may apply to your entity and our team at Hargrove Firm will assist you in analyzing whether your entity falls within one of the carve out provisions available.

What information is reported?

The report includes the following information:

  1. Reporting Company: The report shall include the entity’s full name, any “doing business as” aliases, address, jurisdiction of formation or registration, and tax identification number (TIN/EIN).
  2. Beneficial Owners: The report shall include the full name, date of birth, address, and photograph identification with identification number shown for each individual falling within the definition of “beneficial owner” (see below).
  3. Company Applicants: The report shall include the full name, date of birth, and photograph identification with identification number shown for each individual who assisted in forming the entity.


Who meets the definition of “beneficial owner”?

  1. An individual who, directly or indirectly, exercises substantial control over the reporting company, which includes senior officers (i.e., president, CEO, COO, CFO, GC).
  2. Anyone with the ability to make important decisions on behalf of the reporting company.
  3. An individual, who directly or indirectly, owns or controls at least 25% of the ownership interests of the reporting company, including of convertible interests irrespective of whether these convertible interests are debt or equity, along with directly held options and warrants.
  4. Certain trust arrangements, or those individuals or entities acting as an intermediary, custodian or agent on behalf of another.


Excluded from “beneficial owner” are minor children (as long as the parent or legal guardian’s information is reported), individuals acting as nominees, intermediaries, custodians, or agents, employees acting solely as employees and not as senior officers, individuals whose only interest in a reporting company is a future interest through a right of inheritance or creditors of a reporting company (unless the creditor otherwise meets the definition by the level of control they are able to exercise over the company).


What constitutes “control”?

An individual is deemed to have control or ownership of trust assets if the individual is serving as trustee or otherwise has authority to dispose of trust property.


A trust beneficiary who is the sole permissible recipient of trust income and principal, or who has authority to withdraw trust assets, is deemed to have ownership or control of the trust property. The grantor of a trust is deemed to have ownership or control if the grantor has the authority to revoke the trust or otherwise withdraw trust assets.

When do the reporting requirements of the Act apply?

Starting January 1, 2024, all entities created on or after this date are required to file a report within 30 days of creation/registration. Companies created prior to January 1, 2024, have until January 1, 2025, to file their initial report. Updates and corrections to beneficial ownership information require the filing of a subsequent report within 30 days. Failure to comply with the reporting deadlines may result in both civil and criminal penalties of up to $10,000 and up to two years imprisonment for willful violations.

Where will reports be filed?

Currently, FinCEN is working on the secure filing system which will facilitate these reports. The system will not be available until January 1, 2024. Additional information may be found at www.fincen.gov/boi.

How will Hargrove Firm assist?

Our Business Care team at Hargrove Firm is prepared and equipped to address these reporting requirements for our clients.


Enrollment in our annual Business Care program offers you peace of mind and assurance that our team will maintain your entity’s compliance and related reporting, including those requirements under the new Act. As a participant in our program, you will have a direct line to team members who can assist you with mandatory updates and filings based on changes in your personal and/or business planning. The Business Care team at Hargrove Firm handles all secretary of state reporting and registered agent maintenance in addition to FinCEN’s reporting on beneficial ownership information.


As an added benefit, our team will also provide annual review meetings and preparation of annual minutes for your enrolled entities.


It is important to note that while the Act is effective January 1, 2024, information continues to become available related to the reporting requirements, exemptions, and the process by which the reports will be filed. As recently as Monday, September 18, 2023, FinCEN published the “Small Entity Compliance Guide” which is a great resource for those business owners who are interested in learning more about the Act. Our Business Care team is constantly reviewing the updates and information released to stay informed on behalf of our clients and will provide updates as they become available.

87 FR 59498 (September 30, 2022); Title LXIV of the Willliam M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, Public Law 116-283 (January 1, 2021)(the NDAA); Division F of the NDAA is the Anti-Money Laundering Act of 2020.