Company Applicants: Understanding their role in Corporate Transparency Act

In the realm of corporate transparency, the concept of a company applicant has emerged as a key element of the Corporate Transparency Act (CTA). This legislation, enacted in the United States in 2021, mandates that most companies operating in the country disclose their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). As part of this process, beneficial ownership information reporting companies, those created or registered on or after January 1, 2024, are required to identify and report their company applicants. Lets understand the company applicants to corporate transparency act (CTA) and reporting requirements.

Understanding Company Applicants

A company applicant is an individual who directly files the document that creates or registers a reporting company. This individual plays a pivotal role in establishing the company’s legal existence and facilitating its operations. In cases where multiple individuals are involved in the filing process, the company applicant is the person who is primarily responsible for directing or controlling the filing.

Identifying Company Applicants

Determining who qualifies as a company applicant can be a straightforward process for some companies, while others may face more complexity. To simplify this task, FinCEN has provided a helpful flowchart to assist companies in identifying their company applicants. Additionally, Chapter 3.2 of FinCEN’s Small Entity Compliance Guide offers detailed guidance on identifying company applicants.

Reporting Requirements

Reporting companies created or registered on or after January 1, 2024, are obligated to report their company applicants to FinCEN. This requirement applies to both domestic reporting companies, those formed in the United States, and foreign reporting companies, those that have registered to do business in the United States.

Exceptions to Reporting Requirements

There are instances where reporting companies are exempt from reporting their company applicants. These exemptions apply to domestic reporting companies created and foreign reporting companies first registered to do business in the United States before January 1, 2024.

Role of Accountants and Lawyers

Accountants and lawyers can play a crucial role in the company formation process, and in some cases, they may qualify as company applicants. If an accountant or lawyer directly files the document that creates or registers a reporting company, or if they are primarily responsible for directing or controlling the filing, they are considered company applicants.

Removal of Company Applicants

Once a company applicant has been identified and reported to FinCEN, they cannot be removed from the BOI report, even if their relationship with the reporting company ends. This is because the company applicant’s role in establishing the company’s legal existence remains relevant for the purposes of corporate transparency.

Conclusion:

The concept of a company applicant is an integral aspect of the CTA’s beneficial ownership reporting requirements. By identifying and reporting their company applicants, reporting companies contribute to enhancing transparency and combating financial crimes. Understanding the definition of a company applicant, the reporting requirements, and the exception to these requirements is essential for reporting companies to ensure compliance with the CTA.

Please refer to our comprehensive guide on navigating the Corporate Transparency Act.