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The Corporate Transparency Act (CTA) marks a significant shift in the regulatory landscape for many U.S. businesses. This legislation introduces new compliance requirements, requiring businesses to share more information about who owns and controls them. Companies now need to learn about these new rules and figure out how to follow them correctly..

What is the CTA?

It’s designed to make it harder for criminals to hide illegal activities through businesses.

Its aim is to increase transparency and prevent the exploitation of U.S. corporations and LLCs for criminal gain by requiring reporting companies, beneficial owners, and business applicants to provide specific information to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).

Who does the CTA impact?

Reporting Companies, beneficial owners, and company applicants.

The CTA applies to reporting companies, which are privately held domestic or foreign entities formed or registered under state laws.

Since publicly traded companies already have sufficient reporting requirements, they’re not included under the CTA.

Beneficial owners, defined as individuals with substantial control over a reporting company (e.g., a senior officer with authority to appoint or remove a senior officer) or those who own or control at least 25% of the ownership interests, must also report their information. This definition excludes minor children, non-senior employees, and contingent trust beneficiaries.

A company applicant refers to anyone who submits a request to form or register an entity according to state laws (including a person who directed the filing).

How can applicable entities fulfill the CTA’s reporting requirements?

In short, the reporting requirements involve providing detailed information about the reporting company, beneficial owners, and company applicants, including legal names, addresses, tax ID numbers, and identification documents.

Here’s a more detailed summary.

Reporting companies must give FinCEN the following:

1. Information identifying the reporting company:
   1. Legal name, trade name, and “Doing Business As” (DBA) name
   2. Address of the primary place of business
   3. The jurisdiction where it was originally formed or first registered
   4. Tax ID number
2. Information identifying the beneficial owners and individuals applying on behalf of the company:
   1. Legal name
   2. Date of birth
   3. Current address
   4. Identification number (passport, driver’s license, etc.)
   5. An image of the document containing the identification information
3. FinCEN ID
   1. Unique identification number, useful for repeat filers

When are reports due?

1. • Companies created or registered before January 1, 2024: Report by January 1, 2025.
   • Companies created or registered in 2024: Report within 90 calendar days after receiving notice of effective creation or registration.
   • Companies created or registered on or after January 1, 2025: Report within 30 calendar days after receiving notice of effective creation or registration.

Subsequent reports are required if there are corrections or changes of ownership.

Examples of changes that necessitate a new filing include:

• Alteration to the company’s address
• Modifications in senior management
• In cases where an owner passes away and the business interests transition to new beneficiaries.

After the initial report, if any corrections or ownership changes occur, a new report must be filed within 30 days of the correction or change. There is no ongoing filing obligation otherwise.

What happens if applicable entities don’t comply?

Failure to comply with requirements can result in harsh penalties, such as:

1. Monetary fines: Businesses might have to pay up to $591 for each day they don't follow the rules. This amount started at $500 but goes up each year because of inflation.
2. Jail time: In serious cases, a person could go to jail for up to two years.
3. Bigger fines: They might also have to pay a fine of up to $10,000.

Businesses can get in trouble for:

• Not reporting who owns the business when they're supposed to
• Giving false information about who owns the business
• Not fixing or updating incorrect information they gave before

What do we recommend?

Discuss the impact the CTA will have on your business with an expert.

It’s also important to stay informed about your reporting responsibilities. If you’re a beneficial owner, speaking with your attorney or Certified Public Accountant (CPA) might be prudent to ensure you’re fully prepared to assist in meeting these new requirements.

Would you like further guidance regarding the CTA’s requirements?  

Learn more at FinCEN.gov