about the “company applicant.”

The company applicant includes the organizer of the business—i.e., the person that actually filed the paperwork with the relevant government organization to form the entity, and the person who directed the organizer to form the business. At a minimum, each company will have one company applicant (the direct filer). At most, the company will have two (the direct filer and the person who directed the filing). The same data will be reported for the company applicant(s) and the beneficial owners.

possess “substantial control” if they fulfill any of the following four requirements: (1) they hold a senior officer position; (2) they have the power to appoint or remove senior officers, a majority of the board of directors, or a comparable body; (3) they direct, determine, or have a significant influence over significant decisions made by the entity; or (4) they possess any other type of substantial control.

Additional Resources

FinCEN CTA

Main Website

FinCEN Small Entity Compliance Guide

FinCEN CTA FAQ’s

What Are the Penalties for Failing to File?

The aforementioned personal data about the beneficial owners and company applicants must be included in each entity’s report. Instead of having to repopulate the personal data each time, an entity that the individual beneficial owner is affiliated with just needs to list the owner’s FinCEN ID number if they have one. Using the URL above, you can apply for a FinCEN ID number.

Who is a Beneficial Owner?

A beneficial owner is a person who: (1) has “substantial control” over the entity; or (2) possesses 25% or more of the entity’s equity. Therefore, you can be considered a beneficial owner even if you do not possess any stock or other ownership interest. A trust will be listed as the beneficial owner if it owns the organization. However, unless a trust is established in a state where filing a state form is necessary for the creation of the trust, it should not be necessary for the trust to register as a reporting company. A person will be deemed to

Any person who holds the title of president, chief financial officer, general counsel, chief executive officer, chief operational officer, or any other officer (regardless of official title and who performs a similar duty) is considered a senior officer.

Actual equity, stock, or other comparable interests are examples of ownership interests, as are convertible instruments, calls, straddles, options, and other contracts, agreements, or arrangements that establish ownership in the future.

On the other hand, the following are not considered beneficial owners: (a) minor children; (b) people acting as an agent on behalf of another person; (c) employees of a reporting company whose employment status alone provides them with substantial control, as long as they are not senior officers; (d) reporting company creditors; and (e) people who only have an inheritance-based future interest in a reporting company.

If in doubt, it is better to obtain a FinCEN ID number and complete the registration process since, as you will see below, there is a danger of serious fines for noncompliance with the CTA.

The CTA imposes civil penalties of up to $500 per day, criminal penalties of up to $10,000, and jail time of up to two years for noncompliance. If you file a revised report within 30 days of filing erroneous information, you are supposed to be protected from penalties under safe harbor. However, this is a new law, and there are still lots of unanswered questions.

There is just a single registration form to fill out, no filing fee, and no continuous reporting is needed, unless there are changes to the any part of the Report, such as if there is a change in owners or control personnel. Any change must be disclosed within 30 days after the change.

David L. Oberg and Madison B. Oberg are partners at Oberg Law Group, a law firm that represents high net worth individuals and privately held small-to-mid-sized companies. They focus on commercial transactions and business matters including issues resulting from formation, governance, acquisitions, and real estate. David can be reached at (818) 223-9384, david@oberglawapc.com. Madison can be reached at (818) 212-2991, madison@oberglawapc.com.