The Corporate Transparency Act, or the CTA, enhances corporate transparency to combat money-laundering, terrorism, tax evasion, and other financial crimes. It does so by setting up a national database that identifies the humans behind the companies. This database helps law enforcement sift through companies used for nefarious purposes.
The Objectives of the Corporate Transparency Act
The main objective of the Corporate Transparency Act is to establish a beneficial ownership reporting database. Generally, a beneficial owner refers to an individual who holds at least 25% ownership in a company or exercises significant control over it. However, some exemptions exist, such as an individual whose only interest in the reporting company is through a future right of inheritance. By default, all officers are considered beneficial owners, regardless of their equity ownership in the entity. CTA requires limited liability companies (LLCs) and similar entities to disclose information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a U.S. Department of the Treasury Bureau.
The Requirements of the Corporate Transparency Act
Each beneficial owner will need to submit the following information:
- Full legal name
- Date of birth
- Home address
- PDF (photocopy) of the individual’s U.S. passport or state driver’s license
Failing to submit this information may result in significant civil and criminal penalties. Moreover, ongoing reporting is required, such as in the case of an address change. Corporate filing services, CPA’s, and wealth advisory firms may handle the filing. However, attorneys will have the most relevant expertise in handling this matter.
Entities existing before January 1, 2024, must submit their reports by January 1, 2025. Entities that are created after this must submit reports within 30 days of creation. Attorneys may want to add the documents to templates for creating the entity since this doesn’t leave much time. Changes to the information submitted must be reported within 30 days.
Want more information on how to comply with the new Corporate Transparency Act? Contact us today.