To help combat money laundering , terrorism financing and other criminal funding activities from occurring in the United States , the Corporate Transparency Act ( CTA ) was signed into law in 2020 as part of the National Defense Authorization Act . Unfortunately , caught in this dragnet are legitimate companies to which a compliance burden has been added .
Corporate Transparency Act Prepare for the 2024 Reporting Requirements
To help combat money laundering , terrorism financing and other criminal funding activities from occurring in the United States , the Corporate Transparency Act ( CTA ) was signed into law in 2020 as part of the National Defense Authorization Act . Unfortunately , caught in this dragnet are legitimate companies to which a compliance burden has been added .
By Rolando Garcia , JD , CPA Tax Director
Beginning Jan . 1 , 2024 , the CTA implements uniform beneficial ownership information reporting requirements for corporations , limited liability companies and other business entities formally created in or registered to do business in the United States . Under this new requirement , the identity and other confidential information about the “ beneficial owners ” of these entities must be disclosed to the Department of the Treasury ’ s Financial Crimes Enforcement Network ( FinCEN ).
Note , several accounting professionals , industry associations and governmental organizations have voiced concerns about the expected start date for the new reporting requirement , citing small businesses will be unprepared to meet this obligation . Until formal legislation is passed , businesses should proceed with preparing to meet this new reporting requirement .
Common FAQs Below are a select few FAQs related to the CTA , including who is required to comply , what information is required and more .
Who is required to comply ? All domestic and foreign reporting entities that are corporations , limited liability companies or similar entities that were either :
• Created by the filing of a document with the Secretary of State or a 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 by the filing of a document with a Secretary of State or a similar office under the laws of a State or Indian Tribe .
Some entities , such as banks , credit unions , investment advisors , brokers / dealers , insurance companies and charitable organizations are exempt from the reporting requirement . Businesses with more than 20 employees and $ 5 million in sales with a physical presence in the United States are also exempt .
What company information should be reported ? If a reporting company is created or registered on or after Jan . 1 , 2024 , it is required to report information about itself , its beneficial owners and company applicants . Reporting companies created or registered before Jan . 1 , 2024 , will only need to provide information about itself and beneficial owners .
Reporting companies must report the following information to the FinCEN :
• The company ’ s legal name
• Any trade names
4 VIEWpoint Issue 2 | 2023