In 2021, the U.S. Congress passed the Corporate Transparency Act (CTA) as part of the broader William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021. This legislative action resulted in significant changes to the regulations concerning financial integrity and will require action by the majority of LLCs and Corporations.
The CTA seeks to combat money laundering, terrorist financing, and other illicit activities by enhancing the reporting requirements for business entities. It aims to safeguard U.S. corporations and LLCs from criminal exploitation and aid law enforcement in identifying illicit conduct.
Under the CTA, the vast majority of business owners will now be obligated to provide their beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury Department. Beneficial Ownership Information includes details of who owns the company or exercises substantial control over the business.
Although there are 23 specific exemptions in place, most businesses are subject to this reporting requirement.
Starting January 1, 2024, new entities must submit their Beneficial Ownership Information (BOI) to FinCEN within 30 days of their creation or incorporation. Businesses formed prior to 2024 are required to submit a beneficial ownership report by the end of the 2024 calendar year.
The passage of the Corporate Transparency Act in signifies a pivotal shift in the regulatory landscape. This legislation reflects a proactive approach to combatting money laundering and illicit financial activities. By requiring business owners to disclose their beneficial ownership information to FinCEN, the CTA aims to enhance transparency, protect U.S. companies from criminal exploitation, and bolster law enforcement's ability to detect and address illicit conduct, marking a significant step in safeguarding financial integrity.
To learn more about the Corporate Transparency Act and how it will affect small businesses, visit FinCEN's Small Entity Compliance Guide.
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