On September 30, 2022, the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) published a rule (the Final UBO Rule or the Final Rule) that implements the beneficial ownership information reporting requirements of the Corporate Transparency Act (the CTA).1 The CTA establishes ultimate beneficial ownership (UBO) information reporting requirements for the vast majority of privately held corporations, limited liability companies and other similar entities created in, or registered to do business in, any of the states of the United States.2


  • Compliance Dates. The Final UBO Rule becomes effective January 1, 2024. Existing "reporting companies" and those formed before January 1, 2024 will have until January 1, 2025 to file their initial reports. Reporting companies incorporated or formed after January 1, 2024 must file their initial reports within 30 days of their creation or registration; however, FinCEN recently proposed to amend the Final UBO Rule to provide 90 days for such reporting companies to file their initial reports, instead of 30 days.3 If a previously exempt entity ceases to be exempt, the entity must file a report within 30 days of losing its exempt status.
  • Reporting Companies and Exempt Companies. The Final UBO Rule requires entities that are considered reporting companies to file reports that identify themselves and provide UBO information on the entities' "beneficial owners" and "company applicants." Many key entities are exempt from the Final UBO Rule's reporting requirements, including inactive entities, large operating companies, some subsidiaries, banks and credit unions, and Securities and Exchange Commission (SEC) reporting issuers.
  • Penalties for Noncompliance with the Final UBO Rule. The Final UBO Rule adopts the CTA's penalty framework and clarifies that entities may incur liability for indirect or direct violations, and for acts or omissions. The CTA provides that any willful violation of UBO reporting requirements may result in civil penalties of up to $500 each day a violation goes unremedied and criminal penalties of up to $10,000 and/or imprisonment for up to two years.
  • CDD Rule Differences. The Final UBO Rule does not replace FinCEN's existing customer due diligence (CDD) rule requiring U.S. financial institutions to collect UBO information from their legal entity customers, although FinCEN will be revising the CDD rule to align it with the CTA. The Final UBO Rule provides a broader definition of "beneficial owner" than the previous CDD rule but exempts more companies. Thus, reporting companies can expect that they may have to provide more information to FinCEN and/or identify additional persons as UBOs than previously required to disclose/provide to their banks. Likewise, at least until the CDD rule is amended, financial institutions may continue to collect UBO information from customers that may not otherwise be required to report to FinCEN.


Under the Final UBO Rule, effective January 1, 2024, certain legal entities will be required to submit to FinCEN a report containing certain information relating to the entity, its UBOs, and company applicants. Below we briefly summarize: (1) which entities are required to report UBO information to FinCEN; (2) what information entities must report to FinCEN; and (3) the definition of "beneficial owner" under the Final UBO Rule.

(1) Which Entities Are Reporting Companies That Must Comply with the Final UBO Rule and Which Entities Are Exempt from Compliance?

The Final UBO Rule applies to U.S. domestic reporting companies and foreign reporting companies. A domestic reporting company is any corporation, limited liability company, or other similar entity created by the filing of a document with a secretary of state or any similar office under the law of a state (including U.S. territories and possessions) or Indian tribe (unless exempt). A foreign reporting company is any entity that is formed under the laws of a non-U.S. jurisdiction but is registered with a secretary of state or similar office to do business in that state or tribal jurisdiction in the United States (unless exempt).

Despite the broad definition of reporting companies under the CTA, the Final UBO Rule exempts 23 types of entities from the reporting requirements, including:

  • Entities already required to disclose beneficial ownership information publicly or to federal regulators (e.g., U.S. banks and credit unions, U.S. branches and agencies of non-U.S. banks, securities broker-dealers, investment advisers registered with the SEC, and money services businesses registered with FinCEN);
  • Large operating companies that (1) have 21 or more full-time employees, (2) filed federal income tax returns with the United States in the previous year that demonstrated more than US$5M in gross receipts or sales in the aggregate, and (3) have an operating presence at a physical office within the United States;
  • Inactive entities that existed on or before January 1, 2020 but, among other requirements, are not engaged in active business and have not received or sent funds in an amount greater than $1,000; and
  • Subject to exceptions, subsidiaries whose ownership interests are controlled or wholly owned, directly or indirectly, by one or more exempt entities.

FinCEN made it clear that any ambiguities in exemptions should be interpreted "reasonably narrowly," as the "exemptions for twenty-three specific categories of entities are carefully circumscribed."

(2) What Information Must Be Reported to FinCEN?

Initial reports made to FinCEN must include the following information about the reporting company, its beneficial owners, and company applicants:

Reporting Company Information

  • Full legal name and fictitious names (i.e., "doing business as" names);
  • Address of the reporting company's principal place of business;
  • Jurisdiction of incorporation or formation (for both domestic and foreign reporting companies) and initial registration in the United States (for foreign reporting companies); and
  • Taxpayer Identification Number.

Beneficial Owners and Company Applicant Information

  • Full legal name;
  • Date of birth;
  • Current residential address; and
  • Unique identifying number from an acceptable identification document (or, if information has already been provided to FinCEN, by a FinCEN identifier).

The definition of "beneficial owner" is discussed in (3) below.

A "company applicant" is the individual who directly files the document that creates a domestic reporting company or first registers a foreign reporting company, as well as the individual who is primarily responsible for directing or controlling such filing (if there is more than one individual involved in the filing or registering). Information must be provided for the beneficial owners as well as the company applicants.

(3) Who Are the "Beneficial Owners" That Must Be Disclosed?

Beneficial Owner

Under the CTA, a "beneficial owner" of a reporting company is "any individual, who, directly or indirectly, either exercises substantial control over such reporting company or owns or controls at least 25 percent of the ownership interests of such reporting company."4 This definition is broader than the definition under the existing CDD rule in that the "control prong" under the CDD rule calls for the identification of a single individual with such control, whereas the Final UBO Rule calls for any (i.e., all). Thus, a corporation with four 25% equity holders would, for Final UBO Rule reporting purposes, report all four equity holders as UBOs.

  • Substantial Control

The Final UBO Rule's broad definition of "substantial control" states that an individual exercises substantial control over a reporting company if the individual:

  1. Serves as a senior officer of the reporting company;
  2. Has authority over the appointment or removal of any senior officer or a majority of the board of directors (or similar body); and
  3. Directs, determines, or has substantial influence over important decisions made by the reporting company, including decisions regarding: (i) a sale or other transfer of principal assets; (ii) reorganization, dissolution, or merger; (iii) issuance of any equity or incurrence of any significant debt; (iv) selection or termination of business lines or ventures; (v) compensation schemes and incentive programs for senior officers; (vi) entry into or termination of significant contracts; and (vii) amendments of any substantial governance documents.
  • "Direct or Indirect" Substantial Control

The Final UBO Rule also provides clarity on what constitutes an exercise of "direct or indirect" substantial control. Specifically, an individual may directly or indirectly, including as a trustee of a trust or similar arrangement, exercise substantial control over a reporting company through: (i) board of directors representation; (ii) ownership or control of a majority of the voting power or voting rights of the reporting company; (iii) rights associated with any financing arrangement or interest in a company; (iv) control over one or more intermediary entities that separately or collectively exercise substantial control over a reporting company; (v) arrangements or financial or business relationships, whether formal or informal, with other individuals or entities acting as nominees; or (vi) any other contract, arrangement, understanding, relationship, or otherwise.


There are five types of individuals who are considered "exempt" from the definition of "beneficial owner": (i) a minor child; (ii) an individual acting as a nominee, intermediary custodian, or agent on behalf of another individual; (iii) certain employees of a reporting company, acting solely as an employee and not as a senior officer; (iv) an individual whose only interest in a reporting company is a future interest through a right of inheritance; and (v) certain creditors of a reporting company.

The Final UBO Rule significantly expands the scope of information that legal entities must disclose under U.S. law and signals the U.S. Department of the Treasury's prioritization of corporate disclosure. FinCEN recently published Frequently Asked Questions (FAQs) to clarify common points of confusion and questions about the reporting requirements under the Final Rule.5


1. See Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. 59,498 (Sept. 30, 2022), available at https://www.federalregister.gov/d/2022-21020. FinCEN issued its proposed rule to implement the CTA's beneficial ownership reporting requirements on December 8, 2021. See Beneficial Ownership Information Reporting Requirements, 86 Fed. Reg. 69,920 (Dec. 8, 2021), available at https://www.federalregister.gov/d/2021-26548.

2. A "state" in the United States includes the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, Guam, the United States Virgin Islands, and any other commonwealth, territory, or possession of the United States.

3. Press Release, FinCEN, FinCEN issues a Notice of Proposed Rulemaking to extend the deadline for certain companies to file their beneficial ownership information reports (Sept. 27, 2023), available at https://www.fincen.gov/news/news-releases/fincen-issues-notice-proposed-rulemaking-extend-deadline-certain-companies-file.

4. 31 U.S.C.A. § 5336(3)(A)(i)-(ii).

5. See FinCEN's Beneficial Ownership Information Reporting Requirements, Frequently Asked Questions, available at https://www.fincen.gov/boi-faqs.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.