The Corporate Transparency Act (CTA) is a piece of legislation aimed at combating money laundering, terrorist financing, and other illicit activities by increasing transparency regarding the beneficial ownership of legal entities in the United States. Here are the basic requirements for small businesses under the Corporate Transparency Act:
- Definition of "Reporting Company": The Corporate Transparency Act requires certain "reporting companies" to disclose information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). A reporting company is defined as a corporation, limited liability company (LLC), or similar entity that is created by the filing of a document with the secretary of state or similar office under the laws of a state or Indian Tribe or formed under the laws of a foreign country and registered to do business in the United States.
- Beneficial Ownership Disclosure: Reporting companies are required to submit a report to FinCEN containing information about their beneficial owners. Beneficial owners are individuals who directly or indirectly own or control 25% or more of the ownership interests in the reporting company, or individuals who exercise substantial control over the company.
- Required Information: The information required to be disclosed about beneficial owners includes their full legal name, date of birth, current residential or business address, and a unique identifying number from an acceptable identification document, such as a driver's license or passport.
- Exemptions: Certain types of entities are exempt from the reporting requirements, such as publicly traded companies, financial institutions already subject to regulatory disclosure requirements, and certain types of entities with more than 20 full-time employees and over $5 million in gross receipts or sales.
- Enforcement and Penalties: Failure to comply with the reporting requirements of the Corporate Transparency Act can result in civil and criminal penalties.
It's important for small businesses to understand their obligations under the Corporate Transparency Act and ensure compliance with the reporting requirements. Consulting with legal counsel or compliance professionals can help small businesses navigate the complexities of the legislation and avoid potential penalties for non-compliance.
