Foreign Companies & the CTA: Do I Really Need to File?
The Corporate Transparency Act (CTA) has introduced new reporting requirements for many businesses operating in the U.S., including foreign companies registered to do business in the United States. While the CTA’s primary goal is to enhance transparency and combat financial crimes like money laundering, its broad scope means that even foreign entities may be required to comply. If your company is foreign but conducts business in the U.S., it’s critical to determine whether you need to file under the CTA.
Why Foreign Companies Need to Determine Compliance
Foreign entities registered to operate in the U.S. are not automatically exempt from the CTA’s Beneficial Ownership Information (BOI) filing requirements. The law applies to any corporation, limited liability company (LLC), or similar entity created by filing with a state or tribal authority. This includes foreign entities that have registered in the U.S. to conduct business, such as through a foreign qualification. Even if your business operates primarily outside the U.S., its presence and activities within the country may trigger compliance obligations.
The determination of compliance for foreign entities follows the same general rules as for U.S.-based companies. You need to assess whether your company qualifies under the CTA’s substantial control and ownership tests and whether your business might be exempt. The 23 exemptions outlined in the CTA apply equally to foreign entities, but each exemption requires careful analysis. For example, large multinational corporations with robust reporting obligations in their home countries may still need to file unless they meet the CTA’s specific exemption criteria.
How the Test Works for Foreign Companies
To determine whether your foreign entity needs to file, you must first assess if the company is registered in the U.S. to do business. If it is, you then evaluate whether the company meets the ownership or substantial control criteria. This includes identifying individuals who own at least 25% of the company or exercise significant influence over its operations. In cases where a foreign parent company owns a U.S. subsidiary, you must also assess whether the parent’s owners or controllers meet these thresholds.
Additionally, foreign companies should review the CTA’s exemptions to see if they qualify. For example, public companies registered under the Securities Exchange Act of 1934 or entities with significant regulatory oversight in the U.S. may be exempt. However, exemptions like those for large operating companies require specific criteria, such as having more than 20 employees and a U.S. office. Foreign companies without substantial operations in the U.S. may not qualify for this exemption.
Why You Should Act Now
Failing to comply with the CTA can result in steep penalties—up to $500 per day for non-compliance. Foreign entities should not assume they are exempt or that these rules do not apply. Conducting a thorough analysis of your company’s status and ownership structure is the only way to ensure compliance.
Counsel Club simplifies the compliance process with an easy-to-use platform that helps foreign companies determine whether they need to file. With tools to assess exemptions and file BOI forms securely, Counsel Club ensures you meet your obligations without unnecessary hassle.
