Corporate Transparency Act

WHAT IS THE CORPORATE TRANSPARENCY ACT AND DOES MY BUSINESS NEED TO COMPLY?

The Corporate Transparency Act is a piece of legislation passed in the United States with the aim of combating money laundering, terrorism financing, and other illicit activities facilitated by anonymous shell companies. The Act was included as part of the National Defense Authorization Act (NDAA) for Fiscal Year 2021, which was enacted into law on January 1, 2021. The Corporate Transparency Act went into effect on January 1, 2024. Business already in existence on January 1, 2024 have until January 1, 2025 to comply with registration requirements. Businesses formed on or after January 1, 2024 have ninety (90) calendar days from the date they receive actual or public notice of their company’s creation or registration to comply with registration requirements. Though a Federal Court recently ruled that the Corporate Transparency Act is unconstitutional, the opinion also stated that non-enforcement of the Corporate Transparency Act would be limited to the plaintiffs in that case. Therefore, the Financial Crimes Enforcement Network has advised that registration and compliance is still mandatory for most businesses.

Key provisions of the Corporate Transparency Act include:

1. Beneficial Ownership Reporting: The Corporate Transparency Act requires certain corporations, limited liability companies (LLCs), and other similar entities to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. Beneficial owners are individuals who directly or indirectly own or control a significant portion of the entity’s ownership interests.
2. Disclosure Requirements: Entities subject to the Corporate Transparency Act must disclose the full legal name, date of birth, current residential or business address, and unique identifying number (such as a driver’s license or passport number) of each beneficial owner. The information provided to FinCEN is not publicly accessible but is available to law enforcement agencies and certain other authorized entities for anti-money laundering and counter-terrorism financing purposes.
3. Covered Entities: The Corporate Transparency Act applies to “reporting companies,” which are defined as corporations, limited liability companies (LLCs), or similar entities that are created by filing formation documents with a state or Indian tribe or formed under the laws of a foreign country and registered to do business in the United States.
4. Exemptions: Certain types of entities are exempt from the reporting requirements, including publicly traded companies, companies with a physical presence in the United States, and certain types of regulated entities (such as financial institutions, insurance companies, and charitable organizations).
5. Penalties for Non-Compliance: Failure to comply with the reporting requirements of the Corporate Transparency Act can result in civil and criminal penalties, including fines and imprisonment.

The Corporate Transparency Act represents a significant effort to increase transparency in corporate ownership and combat financial crimes by requiring companies to disclose information about their beneficial owners. The implementation of the Act is expected to have far-reaching implications for businesses, financial institutions, and law enforcement agencies in the United States. It’s important for covered entities to stay informed about their obligations under the Corporate Transparency Act and to monitor updates from FinCEN regarding the issuance of regulations and guidance. Chapkin Law assists businesses in navigating the Corporate Transparency Act and completing their registration requirements. Contact us today to learn more about how we can help register your business for a flat fee.

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