The Corporate Transparency Act (CTA) was included in the National Defense Authorization Act for Fiscal Year 2021 (NDAA 2021) and is designed to address issues related to money laundering and illicit financial activities. As of January 1, 2024, a new reporting requirement went into effect affecting millions of business owners. Here are key points about the Corporate Transparency Act:
1. Beneficial Ownership Reporting: One of the main features of the CTA is the requirement for certain companies to report their beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). Beneficial ownership refers to individuals who directly or indirectly control or own a significant portion of a company.
2. Applicability: The reporting requirement generally applies to corporations, limited liability companies (LLCs), and other similar entities formed under state law. Certain entities may be excluded from this requirement if they fall under one of the twenty-three categories of exempt entities. Most of these exemptions are for entities that are already subject to substantial federal or state regulation.
3. Thresholds: Entities subject to reporting must disclose information about individuals who own or control 25% or more of the ownership interests, as well as a person who manages or controls the entity.
4. Privacy Considerations: While the information will be reported to FinCEN, it won't be made publicly available. Law enforcement and certain government agencies, however, will have access to this information to investigate and prevent financial crimes.
5. Penalties for Non-Compliance: Failure to comply with the reporting requirements may result in civil and criminal penalties. It's crucial for business owners to be aware of these requirements and meet the reporting obligations to avoid legal consequences.
In summary, the Corporate Transparency Act is important for business owners to understand and adhere to in order to promote financial transparency and be in legal compliance to avoid penalties. If you would like more information on the CTA or need assistance filing your BOI, please call us at 703.319.7868.