Corporate Transparency Act

By Erik Lincoln, JD, CPA | Lincoln PLLC – Updated June 2026

The Corporate Transparency Act (CTA) created a beneficial ownership information (BOI) reporting framework that has gone through significant changes since its initial effective date of January 1, 2024. This post explains the CTA’s core concepts – what a reporting company is, who qualifies as a beneficial owner, and what information must be reported – and then addresses where the law currently stands following the March 2025 regulatory changes that exempted most U.S.-formed entities from these requirements.

The Purpose Behind the CTA

Congress enacted the CTA as part of the Anti-Money Laundering Act of 2020 with a bipartisan goal: reduce the use of anonymous shell companies to conceal illicit activity, including money laundering, tax evasion, and financing of criminal enterprises. The mechanism was straightforward – require entities formed or registered in the United States to disclose who actually owns or controls them. The law was sweeping in scope. FinCEN estimated that compliance would affect more than 32 million entities in its first year alone.

What Is a Reporting Company?

Under the CTA’s original framework, a “reporting company” was any entity formed in the U.S. by filing a document with a secretary of state – including LLCs, corporations, and similar entities – unless it qualified for one of 23 exemptions. Foreign entities registered to do business in a U.S. state were also covered. The exemptions covered large entities (defined in part by having more than $5 million in gross revenues and more than 20 full-time employees), as well as regulated industries such as banks, credit unions, securities brokers, insurance companies, and accounting firms registered with the PCAOB.

That scope changed materially in March 2025. FinCEN issued an interim final rule that narrowed the definition of “reporting company” to cover only entities formed under foreign law that are registered to do business in a U.S. state or tribal jurisdiction. All U.S.-formed entities are now exempt. The practical result is that most domestic LLCs, corporations, and partnerships no longer have any federal BOI reporting obligation under the current rule.

Who Is a Beneficial Owner?

The CTA’s definition of a beneficial owner covers two distinct categories of individuals: those who exercise substantial control over an entity, and those who own or control at least 25 percent of the entity’s ownership interests, whether directly or indirectly. “Substantial control” is broader than it sounds – it captures senior officers (CEO, CFO, COO, general counsel), individuals with authority to appoint or remove officers or a majority of directors, and individuals who otherwise direct or make important decisions for the entity, even without a formal title.

The breadth of the substantial control test is one of the reasons the CTA generated significant compliance complexity for closely held businesses. A minority investor who sits on a board and participates in major decisions could qualify as a beneficial owner under the control prong, even without meeting the 25 percent ownership threshold. For entities that remain subject to the reporting rule – primarily foreign reporting companies – understanding who qualifies requires a fact-specific analysis of governance documents, voting arrangements, and practical decision-making authority.

What Information Must Be Reported?

For entities that continue to have reporting obligations, the required disclosures fall into two categories. First, the entity itself must report its legal name, any trade names, its principal place of business address, the jurisdiction of formation, and its Taxpayer Identification Number. Second, each beneficial owner must be individually identified by legal name, date of birth, residential address, and a unique identifying number from an acceptable government-issued document – such as a passport or driver’s license – along with an image of that document.

Company applicants – the individuals who filed the formation document and, in some cases, the individual primarily responsible for directing that filing – must also be reported for entities formed on or after January 1, 2024. This applicant disclosure requirement adds another layer of identification to entities formed after the CTA’s effective date and can require tracking down the responsible person at a registered agent or law firm that handled the formation.

Current Status and What Businesses Should Know

As of the date of this post, U.S.-formed entities remain exempt from federal BOI reporting under FinCEN’s March 2025 interim final rule. FinCEN has stated it intends to finalize the rule and is accepting public comment. The regulatory environment could change, and foreign entities with U.S. operations, as well as entities with foreign beneficial owners or complex ownership structures, should continue to monitor developments closely.

State-level transparency requirements are also developing independently of the federal framework. New York’s LLC Transparency Act became effective January 1, 2026, and other states may follow. Businesses operating in multiple states or with cross-border ownership should confirm their exposure to both federal and state disclosure obligations.

Lincoln PLLC works with businesses and their advisors on CTA compliance questions, international tax planning, and business entity structuring. If you have questions about your entity’s current reporting obligations, contact the firm to schedule a consultation.

Erik Lincoln is a founding member of Lincoln. In addition to being an attorney he is also a CPA. Erik has consistently been recognized as one of the top attorneys in North Carolina, by Business North Carolina.