Corporate Transparency Act Lawyer in Troy, MI

The CTA is a Big Deal for Small Business

There's a new sheriff in town and he wants to know a lot about your business. Small businesses are not accustomed to disclosing details about their owners. That's gonna change.

The Corporate Transparency Act (CTA) goes into effect on January 1, 2024, for new entities, and will go into effect on January 1, 2025, for existing entities. The CTA is a federal law that requires certain types of corporations, limited liability companies, and other similar entities created in or registered to do business in the United States to file reports with the Financial Crimes Enforcement Network (FinCEN) identifying their beneficial owners. 

Companies will need to file Beneficial Ownership Reports

The information that must be reported includes:

  • The beneficial owner's full legal name
  • Date of birth
  • Current residential address
  • Unique identifying number and issuing jurisdiction (e.g., U.S. passport or driver license)
  • Image of document with identifying number

The CTA defines a "beneficial owner" as an individual who:

  • Owns, directly or indirectly, 25% or more of the ownership interest in an entity;
  • Controls, directly or indirectly, the entity; or
  • Has the ability to exercise substantial influence over the entity's management or policies.

There are a number of exemptions to the CTA's reporting requirements, including for entities that are publicly traded, or that are not engaged in certain types of regulated activities.

The information that is reported to FinCEN will be kept confidential and will not be made public. However, it will be available to law enforcement and other government agencies for certain purposes, such as investigating money laundering, terrorist financing, and corruption.

The CTA is intended to increase transparency in the corporate ownership structure and to help prevent illicit activity. It is a significant piece of legislation that will have a major impact on many businesses.

Here are some additional resources that you may find helpful:

Convenient FinCEN Identifier Code

The final rule announced by FinCEN sets out various requirements for individuals and entities that seek to obtain a FinCEN identifier, which can be used in certain circumstances to substitute for other information required to be reported. This will be a convenient way for some individuals to supply the required information simply by providing their unique FinCEN identifier code to the company rather than giving the actual personal information. Instead, their personal information will be on file at FinCEN to be cross-referenced with the code.