The Corporate Transparency Act (CTA) requires that certain regulated entities, such as corporations or Limited Liability Companies (LLCs), file personal identifying information concerning Beneficial Owners and Company Applicants with the Financial Crimes Enforcement Network (FinCEN) under the Department of the Treasury. The intent of the CTA is to deter the use of shell companies for illegal activities, such as money laundering and terrorism financing.
The first step is to determine whether the business is a “Reporting Company” and/or whether the business falls under one of the exemptions. A “Reporting Company” is defined as any entity (a corporation, limited liability company, partnership or other entity type) that is (a) created by the filing of a document with the secretary of state or a similar office under the law of a State or Indian tribe or (b) is formed under the laws of a foreign country and registered to do business in the United States by the filing of a document with a secretary of state or similar office under the laws of a State or Indian tribe. Several types of entities – typically those that are already highly regulated – are exempt from these new reporting requirements.
The personal identifying information that must be supplied by the "Reporting Company" can be accessed by law enforcement, the IRS, certain other agencies, and select financial services companies in a new federal government database called Beneficial Ownership Secure System (BOSS). Once these mandated disclosure provisions go into effect on January 1, 2024, both newly formed and previously established companies, from large to small (but mainly small), will be required to provide certain information to FinCEN. That information will include data detailing: (1) Beneficial Ownership and (2) Company Applicants.
It is important to note that "Reporting Companies" created or registered to do business before January 1, 2024, will have additional time — until January 1, 2025 — to file their initial report with FinCEN. "Reporting Companies" established on or after January 1, 2024, will need to file the report within 30 days of creation.