By Mark Adams
The Corporate Transparency Act (CTA), which was enacted to combat financial crimes such as money laundering and tax evasion, requires certain businesses to disclose information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). Under the CTA, companies, including corporations and limited liability companies (LLCs), must provide details about individuals who directly or indirectly own or control at least 25% of the business or those who exercise substantial control over it. This law aims to increase corporate transparency by eliminating the use of anonymous shell companies that have been exploited for illicit purposes.
However, not all businesses are subject to these reporting requirements. Certain entities are exempt from the CTA’s disclosure obligations. Exemptions include large operating companies with more than 20 full-time employees, over $5 million in annual revenue, and a physical operating presence in the U.S. Additionally, regulated entities such as banks, credit unions, and insurance companies, as well as inactive entities and large exempt entities that file reports with other government agencies, are not required to comply. These exemptions are intended to reduce the reporting burden on larger, well-established businesses that already undergo regulatory scrutiny.
For those businesses that are required to comply, the deadline for filing beneficial ownership information with FinCEN is set for March 21, 2025. Failure to meet this deadline could result in severe penalties, including fines and possible criminal charges (though FinCEN has recently announced that “no fines or penalties will be issued, and no enforcement actions will be taken, until a forthcoming interim final rule becomes effective and the new relevant due dates in the interim final rule have passed.” To see this February 27th announcement – click here.). Eligible employers must take action to ensure they understand whether they fall under the CTA’s requirements and are encouraged to submit their reports ahead of the deadline to avoid legal consequences.
For more information and to file – click here.