What is the Corporate Transparency Act?
The Corporate Transparency Act, or CTA, is a U.S. federal law that was passed in 2020. Its primary aim is to combat money laundering and the use of anonymous shell companies by requiring certain companies to report their beneficial ownership information to the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN). The CTA is significant in the fight against financial crimes as it helps law enforcement agencies and regulators to better trace and identify the individuals behind potentially illicit activities involving anonymous shell companies. It aids in making it more difficult for criminals to hide their assets and financial dealings.
The CTA was enacted into law as part of the National Defense Authorization Act and will go into effect on January 1, 2024.
Which companies are affected by the Corporate Transparency Act?
The CTA applies to a broad range of legal entities, including corporations, limited liability companies (LLCs), and other similar entities. It typically impacts entities that are formed under state law and have a reporting exemption based on their size or activities. Consult with your attorney to determine if the Corporate Transparency Act applies to your reporting entity. Once ready, FinCEN Report can streamline the filing for entities affected by the Corporate Transparency Act.
What information must companies report under the CTA?
Covered companies are required to report information about their beneficial owners, which includes individuals who own or control at least 25% of the company or exercise substantial control over its operations. The reported information includes names, dates of birth, addresses, and identification numbers.
What are the penalties for non-compliance with the CTA?
Companies that fail to comply with the reporting requirements of the CTA may face civil and criminal penalties, including fines and imprisonment. Individuals who willfully provide false or misleading information may also be subject to penalties.
How can companies ensure compliance with the Corporate Transparency Act?
You’ll be able to either file directly via the U.S. Treasury Department website or seek assistance with our partners at FinCEN Report.
What are the reporting deadlines for companies under the Corporate Transparency Act?
New companies formed after 2024 have to apply within 90 days of formation. Existing companies that are subject to the CTA must report their beneficial ownership information within one year of the effective date of the regulations (January 1, 2024).
Does the Corporate Transparency Act apply to foreign-owned companies operating in the United States?
Yes, the CTA applies to foreign-owned companies that conduct business within the United States and meet the reporting criteria. It is part of the U.S. government's efforts to ensure transparency and prevent the misuse of anonymous entities for illicit purposes.
Our partners at FinCEN Report can help facilitate compliance with the Corporate Transparency Act, See What is FinCEN Report?
Last updated on December 7, 2023