The Corporate Transparency Act – What You Need To Know
Since the January 1, 2024 compliance effective date for the Corporate Transparency Act, I have been inundated with compliance inquiries. Here is what you need to know.
Background
On January 1, 2021, Congress passed the Corporate Transparency Act (“CTA”). The CTA requires all business entities, subject to certain exceptions, to disclose information about the entity and the individual(s) who own such entity and/or have substantial control. The CTA was created to help the United States government combat money laundering, tax fraud and illegal foreign ownership of U.S. businesses. On September 30, 2022, the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a Final Rule on the CTA, explaining what information needs to be disclosed in the form of a Beneficial Ownership Information Report (referred to as a “BOI Report”). For a review of the rule release, see HERE. The BOI Report will become part of a national database on corporate ownership.
The CTA specifically requires entities to file
Private Company Ownership Secrecy Is In The Past
This topic has been sitting on my list since the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) proposed beneficial ownership reporting requirements for private companies back in December 2021. The final rules were adopted in October 2022 and I’m finally unpacking this doozy. The new FinCEN rules implement provisions of the Corporate Transparency Act which, in turn, has been law since October 2019. The regulations create new federal filing requirements applicable to a wide range of entities, including operating companies, holding companies, LLCs and others. The goal of the rule is to enhance FinCEN’s ability to protect national security and the financial system, by providing information that can be used by national security, intelligence, and law enforcement agencies.
Corporate Transparency Act of 2019
The Corporate Transparency Act requires small corporations and limited liability companies to disclose information about their beneficial owners. Under the Act, a beneficial owner is an individual who (i) exercises substantial control over
