Why the Corporate Transparency Act Likely Doesn’t Affect You
This blog is primarily intended for our international clients that do business here in the United States. To be clear, “domestic reporting companies” are still currently exempt from filing BOI reports with FinCEN. This means that companies incorporated inside the U.S. are generally exempt from the reporting requirements previously imposed under the CTA.
The Corporate Transparency Act (CTA) introduced new reporting requirements affecting many businesses when Congress enacted it in 2021, officially going into effect at the beginning of 2024. The CTA initially mandated that Reporting Companies provide initial and periodic updates to Beneficial Owner Information (BOI) reports filed with the Financial Crimes Enforcement Network (FinCEN). These reports typically include identifying details of beneficial owners who possess 25% or more of a company, as well as certain individuals exercising "substantial control," commonly including individuals like officers and directors.
Over the past year, however, the CTA has experienced significant back and forth. Legal challenges in federal courts led to cycles where reporting requirements were alternately enforced and suspended, generating substantial uncertainty and concern for businesses of all sizes.
This uncertainty was finally put to rest on March 2, 2025, when the U.S. Treasury intervened to temporarily halt enforcement of the CTA, indefinitely exempting companies designated as "domestic reporting companies." Treasury Secretary Scott Bessent described the decision as "a victory for common sense." Further clarifying this stance, FinCEN issued an interim final rule in late March requiring only those entities previously classified as "foreign reporting companies" to report their BOI.
While this decision relieved many U.S. based businesses, it inadvertently sparked confusion among many of our international clients. Foreign companies aiming to operate in the U.S. traditionally have not registered their existing foreign entity directly. Instead, they have frequently chosen to establish new Delaware LLCs or corporations, often owned by their foreign entity. Technically, these newly established entities would typically fall under the definition of "domestic reporting companies," exempting them from BOI reporting.
Practical Example:
Consider a well-established eCommerce platform based in India experiencing consistent growth and now exploring expansion into the U.S. If this company registers directly as a foreign entity within the United States, it generally would fall under the definition of a "foreign reporting company," potentially making it subject to BOI reporting. A “foreign reporting company” is typically defined as any entity incorporated under the laws of a foreign country. Alternatively, if the same company chooses instead to establish a new Delaware LLC wholly owned by the existing parent entity in India, this newly created U.S. entity would traditionally be considered a "domestic reporting company” since it was incorporated by filing a document with a Secretary of State’s office or similar office inside the U.S., and therefore would currently be exempt from BOI reporting obligations.
Given the Treasury’s recent guidance, it is extremely unlikely that international businesses forming new U.S. entities would be subject to BOI reporting requirements. While it seems unlikely at this time, further regulatory changes certainly remain a possibility in the future. International clients looking to form new Delaware entities should remain aware of these developments and consult appropriate professionals if they have questions regarding their specific compliance obligations. If you’re considering establishing a new Delaware LLC or corporation, Harvard Business Services, Inc. is here to help you incorporate quickly, efficiently, and with confidence!
*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.