Are Trusts Required to Report under the Corporate Transparency Act (CTA)?

Generally, the answer is no.

Starting January 1, 2024, the Corporate Transparency Act (CTA) will require most U.S. corporations, LLCs, and other legal entities formed through state filings or foreign entities registered to do business in the U.S. (“Reporting Company”) to file a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN). In general, a Reporting Company is any entity created by filing a document with a state’s secretary of state office.

A trust is not a Reporting Company under the CTA because it is generally not an entity created by filing a document with a state’s secretary of state. A trust often needs to file with the IRS to get an EIN, but that is a different type of filing (not with a state’s secretary of state).

However, a trust may be an owner of a reporting company, in which case it may need to provide the identifying information about its beneficial owners to the reporting company for inclusion in the company’s FinCEN report. If a trust owns 25% or more of a reporting company or has substantial control over the reporting company, then the individuals who ultimately own the interest in the reporting company through the trust qualify as beneficial owners. This usually means one or more of the following individuals must be reported: (i) the Trustee, (ii) the beneficiary, (iii) the Settlor, and (iv) other individuals named in the trust who have certain powers.

Planning Pointer: Many individuals who may be contemplating the establishment of a new business will find providing information to a governmental agency about beneficial owners to be invasive and onerous. As a possible, viable alternative, such individuals might consider using trusts through which to conduct business operations in place of corporations, partnerships, and limited liability companies. Such a trust could have a combination and succession of trustees and/or trust protectors or directors, and they could be given, respectively, different levels and/or types of responsibilities. They could function like a conventional board of directors and, as such, could employ agents who would be like officers in the corporate context. The trust beneficiaries could have beneficial interests crafted to make them analogous to shareholders, partners, or members. The trust instrument could limit the trustee and/or protector or director’s fiduciary duties to mirror directors’ fiduciary duties in the corporate context.

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