The Corporate Transparency Act (CTA) is a U.S. federal law aimed at enhancing corporate transparency and preventing the illicit use of anonymous shell companies for illegal activities such as money laundering, fraud, and terrorism financing. The CTA was enacted as part of the National Defense Authorization Act for Fiscal Year 2021.
Key provisions of the Corporate Transparency Act include:
- Beneficial Ownership Reporting: Companies are required to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), which is a bureau of the U.S. Department of the Treasury. Beneficial owners are individuals who directly or indirectly control a significant ownership interest in the company.
- Definition of Beneficial Owner: The CTA defines a beneficial owner as an individual who, directly or indirectly, exercises substantial control over a company or owns or controls at least 25% of the ownership interests of the company.
- Reporting Requirements: Companies, including limited liability companies (LLCs), corporations, and similar entities, are obligated to file reports with FinCEN containing information about their beneficial owners. This information is not publicly disclosed but is made available to law enforcement and certain government agencies for investigative purposes.
In a recent episode of SBAM’s Small Business Briefing, attorney Corinne Sprague of Warner Norcross + Judd provided detailed insight into the Corporate Transparency Act and what small business owners need to do to be compliant.
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