On January 1, 2024, the Corporate Transparency Act went into effect. This significant piece of legislation aims to enhance transparency in business activities by requiring certain companies to disclose their ownership information.
IBIS World reported the United States had a little over 8 million businesses in 2023. Many of these companies will need to understand the impact of the CTA on their business.
The role of the CTA
The CTA is a federal law that aims to combat money laundering, terrorism financing, and other illicit financial activities. It does this by identifying the individuals who ultimately own and control certain companies.
The CTA requires reporting information about business owners to the Financial Crimes Enforcement Network. Beneficial owners are individuals who directly or indirectly own or control at least 25% of the ownership interests in the company.
The reporting obligation applies to a broad range of entities. However, exceptions exist for certain types of companies, such as publicly traded companies and those already subject to robust reporting requirements.
Compliance with the CTA
Compliance with the act involves submitting detailed reports to FinCEN. These reports must include the names, addresses, birthdates, and identification numbers of business owners. This information helps to create a comprehensive database that law enforcement agencies can use to trace and prevent financial crimes.
The Corporate Transparency Act introduces additional compliance measures for businesses, but these measures are beneficial to everyone by safeguarding the financial system and protecting against illicit activities.