The Corporate Transparency Act (CTA) has ushered in a new era of accountability, demanding a clear view of who’s at the helm of a business to combat illicit activities. Initially passed by Congress in 2021 to curb money laundering, terrorism financing, and other illicit financial practices, the CTA imposes new obligations on certain businesses to disclose information about their beneficial owners and corporate structure to FinCEN. These freshly added regulatory changes went into effect on January 1, 2024. Here’s what you need to know to stay ahead of the game:
Reporting Companies: Who Needs to Comply with CTA?
Businesses falling under the CTA’s scope include corporations, LLCs, and other entities formed or registered to do business in the United States. FinCEN designates these businesses as reporting companies. Exemptions exist for publicly traded companies, certain financial institutions, and small businesses meeting specific criteria (although most small to mid-sized businesses will need to comply).
Who Are the Beneficial Owners?
The CTA applies to “Beneficial Owners” – who are individuals who wield substantial control or own a significant portion (25% or more) of the business. Think senior officers, decision-makers, and key influencers – they’re in the spotlight.
The Disclosure Requirements for Businesses
For each individual beneficial owner, businesses must disclose:
- Full legal name.
- Date of birth.
- Complete current address.
- Unique identifying number from a valid US Passport or state-issued ID.
- An image of the identification document from which the unique number was obtained.
Additionally, businesses must disclose their:
- Full legal name.
- Trade names or DBAs.
- Complete current address.
- State of formation.
- IRS taxpayer identification number, including an EIN.
Don’t Miss a CTA Reporting Deadline
When reporting your company’s beneficial ownership information to FinCEN, it’s crucial to note that the timeline varies based on your business’s creation or registration date. Businesses in existence before January 1, 2024, have a full year to complete their reporting requirements, or by January 1, 2025. Businesses formed after January 1, 2024, must report at or near the time of formation. Business owners must stay informed about FinCEN’s reporting deadlines, as submissions began being accepted earlier this year, starting January 1, 2024, through FinCEN’s BOI E-Filing website (https://boiefiling.fincen.gov).
Why CTA Compliance Matters
Beyond avoiding hefty fines and legal headaches, compliance with the CTA is not just about checking boxes—it’s about safeguarding your business against financial crimes and ensuring transparency in your operations. By mandating the disclosure of beneficial ownership information and key corporate details, the CTA aims to strengthen anti-money laundering efforts and bolster national security, underscoring the importance for businesses to stay informed, implement proactive compliance measures and adopt robust corporate governance practices.
Be Ready to Embrace Greater Transparency
Navigating the CTA maze may seem daunting, but your business does not have to navigate through the twists and turns alone. At Putterman Law, we are adept in navigating complex regulatory landscapes and we are here to help businesses gather and submit accurate disclosures while minimizing risks. Contact us today to ensure your business stays compliant and competitive in an era of heightened transparency—let transparency become your business’s superpower!
