Corporate Transparency Act: Part I
February 9, 2023 | Carole Clark Isakson
An Introductory Overview
Congress passed the Corporate Transparency Act (the “CTA”) in 2020 as part of its initiative to crack down on illicit activities, such as money laundering, commonly associated with shell companies. Under the CTA, many entities formed or registered to do business in the United States will be required to report various information concerning beneficial ownership of/decision-makers for, a given company. The Financial Crimes Enforcement Network (“FinCEN”), under the direction of the United States Department of the Treasury, has been tasked with preparing the regulations that will govern the beneficial ownership reporting requirement and provide for enforcement.
The reporting obligations under the CTA will impact hundreds of thousands of entities, including corporations, limited liability companies, partnerships, and various non-profit organizations. The most significant impact will be felt by small and mid-size companies, and the individuals who own and operate them, who did not previously have any mandated federal reporting responsibilities.
Final regulations under this Corporate Transparency Act were released by FinCEN in September 2022, and go into effect beginning January 1, 2024.
Entities and individuals subject to these new regulations will be required to submit a beneficial ownership information report identifying each beneficial owner, decision maker, and company applicant. These individuals will be required to submit information about themselves as part of the reporting process (including name, address, identifying number such as social security number, birth date, and government photo-identification).
Not every entity must report; there are exceptions for large companies and some already-regulated industries. Beginning January 1, 2024, existing companies who are not exempt will have until December 31, 2024 to comply with the reporting requirements. For entities formed after January 1, 2024, the beneficial ownership reporting must be completed within 30 days of entity formation.
The initial report does not end an entity’s obligation under the CTA. Any change in beneficial ownership data must be reported to FinCEN within 30 day of such change occurring. Changes that must be reported include, but are not limited to: a change of officers, a change to mailing address, or a correction to previously provided data.
Future blog posts on our site will touch upon Corporate Transparency Act reporting exemptions, risks of non-compliance, reporting guidance and more.
Barna, Guzy & Steffen, Ltd.’s corporate law practice group continues to closely monitor developments in this area. If you believe you or your business may be impacted by these requirements, one of our knowledgeable corporate attorneys would be happy to navigate you through this process. Please contact BGS attorneys Carole Clark Isakson, Scott M. Hagel for assistance.