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What Businesses Need to Know: Corporate Transparency Act’s New Beneficial Ownership Reporting Requirements

Fred Strasheim Eileen Duffy Robinett Nabil Al-Khaled February 14, 2024

The American business landscape is undergoing significant changes with the implementation of the Corporate Transparency Act (CTA). This landmark legislation introduces critical new reporting requirements. To help clients understand these requirements and the related impacts, we will walk through some key CTA components that businesses need to know and act upon.

Click here to download a copy of our full comprehensive memo on the CTA.

As background, Congress enacted the Corporate Transparency Act (CTA), as part of the Anti-Money Laundering Act of 2020, to address concerns related to illicit activities such as money laundering, terrorism financing, tax fraud, and other financial crimes facilitated through the use of anonymous shell companies. The CTA is designed to bring the United States into compliance with international anti-money laundering standards, including those in the United Kingdom and the 28 member states of the European Union.

FinCEN estimates that approximately 32 million reporting entities will be required to register under the CTA in 2024, with an additional 5 million reporting entities needing to register each year thereafter. Reporting by new and existing entities is required as of January 1, 2024, and the expected impact is significant to small- and medium-sized businesses.

Generally, the CTA states that reporting companies need to file a report with FinCEN about itself and its beneficial owners. This includes corporations, limited liability companies, limited partnerships, or other entities. It also includes entities organized under the laws of a foreign jurisdiction and registered to do business by making a filing with a U.S. state or Tribal authority. Additionally, reporting companies formed on or after January 1 need to include information for up to two company applicants. Finally, a reporting company must update information about itself and its beneficial owners (but not its company applicants) as changes occur.

No doubt, understanding the ins and outs of the CTA and its requirements is complex.

To help reporting companies and their beneficial owners understand the details, we offer an informational memorandum and FAQs covering several important components. In our memo, we answer critical questions about compliance with the CTA, demystifying information surrounding:

  • Reporting companies
  • Beneficial owners
  • Company applicants
  • Beneficial owner reports
  • FinCEN identifiers
  • Access to filings
  • Penalties for failure to file
  • Penalties for incorrect filing
  • Procedures for compliance

To download a full copy of the memo, please complete this contact form.

We understand how important it is to stay on top of the changing CTA requirements and will continue to monitor and report on developing implementation and other FinCEN actions.

In the meantime, if you have any questions or need help complying with the current regulations, please reach out to your Thompson Coburn contact for assistance.