Like Christmas, compliance with the Corporate Transparency Act (CTA) rapidly draws near. If you have yet to comply, it is crucial for businesses to understand the implications of this new regulation and take the necessary steps to comply.

Enacted as part of the National Defense Authorization Act in 2021, the CTA requires certain businesses and entities to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). This move is part of a broader effort by the U.S. government to combat money laundering, tax evasion, and other illicit activities by increasing transparency in business ownership structures.

Companies formed or registered to do business in the U.S. must provide detailed information about the individuals who own or control them. This information will be collected by FinCEN and will be accessible to law enforcement and other authorized agencies for investigative purposes.

By January 1, 2025, existing companies formed before 2024 must submit their beneficial ownership information to FinCEN at https://fincen.gov/boi. New companies formed from January 1, 2024 to December 31, 2024 have 90 days to file, and any companies formed after 2025 will need to submit their information within 30 days of formation.

Additionally, the information submitted to FinCEN must be updated within 30 days of any changes, such as a change in ownership or control.

Who Needs to Comply?

Exemptions from reporting exist for larger, regulated businesses, such as publicly traded companies, large operating companies, regulated financial institutions, not for profits and inactive entities. However, most smaller businesses, including LLCs and certain partnerships, are not exempt and will need to comply.

What Information Must Be Disclosed?

Businesses subject to the CTA must report the following information for each beneficial owner or the person in “substantial control”:

1. Full legal name
2. Date of birth
3. Current residential or business address
4. A unique identification number from a government-issued document, such as a passport or driver's license.

A “beneficial owner” is generally defined as any individual who directly or indirectly owns 25% or more of the company or exercises substantial control over it.

Steps to Take Now

• Identify your beneficial owners: Ensure you know who qualifies as a beneficial owner under the CTA's definition
• Prepare your information: Gather the required details for each beneficial owner
• Monitor for updates: Keep an eye on any regulatory changes and make sure your company's information is updated promptly
• Consult professionals: If you're unsure about whether your business is exempt or need assistance with the reporting process, it's wise to consult legal professionals.