Congress recently passed the Corporate Transparency Act (CTA) as part of the National Defense Authorization Act, 2021, in a continuing effort to combat money-laundering and terrorist financing. The CTA requires private companies and LLCs to disclose their beneficial owners to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and is expected to be enacted by January 1, 2022. For more information on the CTA and how it affects you, contact your advisor or a member of our team at 866-717-1607. Highlights of the Act include:
Who is a Beneficial Owner?
- A beneficial owner of a company or LLC is the individual who controls the company or owns at least 25% of the ownership interests in the company
What Types of Entities Need to Report?
- Any corporation, LLC, or other entity that is created by filing a document with the secretary of state (or similar office) of any state
- Entities formed under foreign law but are registered to do business in the U.S. in a like manner are included in the CTA
What Types of Entities are Exempt From Reporting?
- Companies that are already subject to supervision or otherwise closely regulated by the federal government, such as banks
- Publicly traded companies
- Dormant companies
- Companies that employ more than 20 people, filed a tax return reporting gross receipts in excess of $5 million, and have a physical presence in the United States
- Any entity owned by an entity otherwise exempt
What Information Must Be Reported?
- Name, date of birth, current business or residential address, and unique identifying number for each beneficial owner is required to be reported to the FinCEN
What is the Purpose of the CTA?
- The objective of the CTA is to halt the use of shell companies to hide money from illicit activities
- The CTA will bring the U.S. into compliance with international anti-money laundering standards
We will continue to provide additional guidance to you as it becomes available.
Please contact your advisor or a member of our team if you have any questions regarding the CTA, how to prepare for reporting, and the impacts of this updated legislation.