Breaking Down Reporting Requirements Under the Corporate Transparency Act

On January 1, 2024, the business landscape in the United States underwent a significant transformation thanks to the
Corporate Transparency Act (CTA). This groundbreaking legislation, being discussed and dissected by every business law firm in America in some capacity, received bipartisan support as it passed through the legislature.

At its core, it aims to address and deter financial crimes like money laundering and even illegal funding of terrorist operations. However, its introduction brings about intricate compliance demands for American businesses and entities operating in the United States. Most notably, it directly impacts a broad spectrum of businesses, smaller enterprises, private investment funds, family-run offices, and angel investors.

The most notable element of the CTA for most companies is the new Beneficial Ownership Information (BOI) reporting requirements.

An Overview of the CTA

    • Who Does the CTA Affect?: The CTA’s extensive reach applies to nearly all business entities registered or incorporated in the U.S. Don’t assume your business is too small to fall under its umbrella. The CTA includes entities within the country and those established abroad but operating in the U.S.
    • What Is a Reporting Company?: The Act classifies ‘reporting companies’ as domestic and foreign entities, with some exceptions (like SEC-reporting companies and certain tax-exempt organizations). A key exemption is for “large operating companies” meeting specific criteria, including a substantial employee base, significant gross receipts, and a physical U.S. office. However, these organizations will still likely consult their legal counsel to ensure they are exempt. 
    • Disclosing Beneficial Ownership: A central requirement is the disclosure of beneficial owners of the reporting companies. This term covers individuals holding considerable control or ownership stakes, including through indirect means such as intermediary entities. The CTA, a part of the Anti-Money Laundering Act of 2020 in the United States, mandates that certain corporations, limited liability companies, and similar entities report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).
    • Company Applicants: The CTA necessitates details about company applicants—those responsible for the entity’s formation filings.
  • Mandatory Reporting Details: Reporting companies must furnish various details, including legal and trade names, addresses, and identification details of beneficial owners and company applicants.
  • Compliance Timeline: Compliance timelines vary based on the entity’s formation date, with a window ranging from 90 days to a year post the effective date. Established companies have the full year (until January 1, 2025), but newly-formed entities have 90 days from the date of incorporation to file this information.
  • Privacy and Data Accessibility: While these reports are confidential and not publicly accessible, they are available to certain federal and state agencies for legal, regulatory, and law enforcement purposes.
  • Penalties for Noncompliance: There are strict civil and criminal penalties for failing to comply with the CTA. For small business owners, the CTA brings a new set of challenges regarding compliance. It’s essential for these businesses to evaluate if they fall into the ‘reporting company’ category and start preparing accordingly. This preparation involves maintaining updated records of beneficial owners and ensuring timely reporting.

Additionally, due diligence now includes verifying a target company’s compliance with the CTA in the context of mergers and acquisitions. Overlooking this could result in inheriting compliance issues.

Beckemeier LeMoine Law

The CTA marks a pivotal change, prioritizing transparency and legal accountability. While it aims to combat severe financial misconduct, it simultaneously places significant new responsibilities on businesses. Adaptation to these regulatory shifts demands thorough planning and constant alertness to ensure adherence and avoid hefty penalties.

For businesses needing clarity or assistance with CTA compliance, Beckemeier LeMoine Law is here to help. Our experience with business law, including corporate mergers, acquisitions, real estate, and estate planning, positions us ideally to guide you through these changes. With our firm’s commitment to being intentional, relational, and responsive, we offer tailored legal advice and solutions to ensure your business remains compliant and prosperous in this new regulatory environment. Contact Beckemeier LeMoine Law and schedule a consultation for legal support with navigating the complexities of the CTA.

Call 314-965-2277 now or contact us online to schedule a consultation with one of our highly skilled attorneys today.