The Corporate Transparency Act (CTA) is a law enacted in 2021 as part of the Anti-Money Laundering Act of 2020. It aims to enhance transparency in the ownership of businesses by requiring certain entities to report their beneficial ownership information to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).
Key objectives of the CTA:
• Combat money laundering, terrorist financing, and other financial crimes: By making beneficial ownership information readily accessible to law enforcement, the CTA aims to make it harder for bad actors to use shell companies and other opaque business structures to hide their illicit activities.
• Increase tax compliance: By making it easier for tax authorities to identify the true owners of businesses, the CTA aims to improve tax compliance and reduce tax evasion.
• Promote good corporate governance: By making beneficial ownership information public, the CTA aims to hold businesses more accountable to their stakeholders and investors.
Entities covered by the CTA:
• Corporations
• Limited liability companies (LLCs)
• Other entities created by the filing of a document with a secretary of state or a similar office
Information required to be reported:
• Name and date of birth of each beneficial owner
• Address of each beneficial owner
• Unique identifying number (such as a passport number or driver’s license number) for each beneficial owner
• Percentage of ownership interest held by each beneficial owner
Timeline:
• The CTA’s reporting requirements will become effective on January 1, 2024.
• Reporting companies formed or registered before January 1, 2024, will have two years to submit their initial report to FinCEN.
• Reporting companies formed or registered on or after January 1, 2024, will have 90 days to submit their initial report to FinCEN.
Resources:
• FinCEN website: https://www.fincen.gov/sites/default/files/shared/Corporate_Transparency_Act.pdf
• American Bar Association article: https://businesslawtoday.org/2021/04/corporate-transparency-act-preparing-federal-database-beneficial-ownership-information/
• Wolters Kluwer article: https://www.wolterskluwer.com/en/news/the-corporate-transparency-act-is-poised-to-have-a-significant-impact-on-businesses
Please let me know if you have any specific questions about the CTA.
Sincerely,
Andrew M. Jaffe
Attorney at Law