What is The US Corporate Transparency Act

There is soon going to be a new law introduced to the US. The US Corporate Transparency Act will create a robust, comprehensive record of beneficial ownership information. The goal of the new act, abbreviated to CTA, is to prevent corrupt business practices like money laundering and the financing of terrorism. Law enforcement agencies will use the information to track suspicious behaviors and prevent crime.

The beneficial ownership rules will apply to all domestic and foreign entities that have been registered at the Secretary of State level, or any other similar office under the laws of the state/Indigenous tribe. Numerous businesses are going to be affected by this, and many need to prepare now to ensure that they’re compliant with the new rules.

In this article, we will look at the Corporate Transparency Act Regulations, who it will affect, and what needs to be done for continued business success.

What are the Corporate Transparency Act Regulations?

The Corporate Transparency Act is a regulation that will force companies to identify who owns, controls and benefits from the activities of the business. The USA is not the only country that is applying similar laws across the world. There are at least 30 countries that have already applied their own version of the law.

The information provided to the government should make it easier for the intelligence community to find illegal activities and keep individuals safe. In addition, it helps to maintain fair use of financial resources, ensuring that businesses don’t use malpractice to evade taxes.

When Does the Corporate Transparency Act Regulations Come into Effect?

The Corporate Transparency Act Regulations come into effect on January 1st, 2024. After this date, all new company formations will have 30 days to submit initial Beneficial Ownership Information (BOI) reports. Those companies that were formed before the effective date have one year (January 1, 2025) to file their BOI reports.

When there is a change in the beneficial ownership, which may include any information, such as a change of name, address, etc. after the BOI reports have been filed, the change must be reported to the relevant department within 30 days of the change.

Which Industries Are Affected?

There are going to be numerous business sectors that are going to be required to submit this information. Any company that is a corporation, limited liability company, or an entity created through the filing of a document with the Secretary of State/similar office under applicable state law, will need to file a BOI report.

The rules include existing and future domestic and foreign business entities.

Though there are 23 types of exempt entities that will not be required to submit this information, these include securities reporting issuers, banks, government authorities, banks, credit unions, depository institution holding companies, brokers/dealers in securities, money service businesses, investment companies/investment advisers, insurance companies, public utilities, accounting firms, venture capital fund advisers and some other businesses.

What Information Must be Reported?

Reporting companies will need to provide information to the Financial Crimes Enforcement Network, otherwise known as the FinCEN. The information about the beneficial owner should include,

Information on the Reporting Company: This information should include full legal name, business address, jurisdiction of formation/registration and the Taxpayer Identification Number. Foreign companies (i.e. those operating from outside of the state) will be allowed to use a foreign tax identification number if they do not have a US TIN.

Beneficial Owner/Company Applicant: Each of the beneficial owners of the reporting company, and the reporting company’s company applicant needs to provide a full legal name, date of birth, current residential/business street and unique identification number with an acceptable identification document. When there is no US identification number available, a valid non-US passport will be acceptable.

FAQs

Here are some of the most common FAQs on the subject.

Do I need a lawyer to submit the information?

No, you do not need a lawyer to help your business to submit the information. You can easily complete all the information required and submit the information to the relevant individuals.

When do I need to submit the information?

If your business is formed after the effect date (January 1st, 2024) then the company has 30 days to submit the information from the date of formation. If the company was formed before this date, then they have until January 1st, 2025.

Is this law applicable to all businesses?

Most US businesses and those operating in the country will be required to submit this information. There will be some exceptions, based on the niche the business operates in.

Final Word: What is The US Corporate Transparency Act

The US Corporate Transparency Act is a new piece of legislation that allows governments to track immoral and illegal behaviors. Many businesses will have to submit this information and getting prepared now is the best way to ensure that your business is compliant.