The federal Corporate Transparency Act (CTA) was designed to protect U.S. national security and the U.S. financial system from money laundering and other illicit activities concealed by anonymous shell companies by requiring domestic companies and foreign companies registered to do business in the U.S. to report information on their beneficial ownership.
Effective Jan. 1, 2024 and subject to limited exemptions for certain types of companies, the CTA requires all corporations, limited liability companies, limited partnerships, and other entities created or registered to do business by the filing of a document with a secretary of state or similar office, in any U.S. state, to file reports with the U.S. Treasury Department with detailed beneficial ownership information (BOI) about each of their beneficial owners.
Covered entities formed after the Jan. 1, 2024 effective date must file such BOI reports within 30 days after the filing of formation documents; for existing covered entities, BOI reports must be filed within one year following the effective date. Entities also have an ongoing obligation to file updated BOI reports within 30 days after any change in the information included in a previously filed BOI report. Penalties for noncompliance with the CTA can be $500 per day (up to $10,000) and up to two years in prison.
Many businesses, particularly those with numerous affiliated operating entities, expect this process to be a significant, time-consuming undertaking, so planning for compliance with the CTA should begin now. Legal counsel can assist entities determine if they are subject to the obligations the CTA imposes, provide advice on report preparation, and provide guidance with respect to additional provisions to be added to a company’s organizational documents.
Corporate Transparency Act Resources
The following are resources from the Financial Crimes Enforcement Network:
- Beneficial Ownership Information Reporting Frequently Asked Questions
- Beneficial Ownership Information Reporting Rule Fact Sheet
- Final Rule as published in the Federal Register
Attorneys related to this topic include:
This item has been provided as an informational service and does not constitute legal counsel or advice, which can only be rendered in the context of specific factual situations. If a legal issue should arise, please contact an attorney listed or retain the assistance of other competent legal counsel. Case results depend on a variety of factors unique to each case and results do not guarantee or predict a similar result in any future case undertaken.