The Corporate Transparency Act & Maintaining Compliance

The Corporate Transparency Act (CTA) has been described as trying to kill a mosquito or a fly with a sledgehammer. It’s a large requirement that will impact millions of people, but its intent is to look for only those with malicious intent who are exploiting American entities for illicit activities.

The goal of the act is for FinCEN, the Financial Crimes Enforcement Network, to be able to weed out any potential concerns within business ownership, such as money laundering, tax fraud, financing for terrorism, and more. These issues pose a threat to American security and can negatively impact economic integrity, so the Corporate Transparency Act aims to discover and expose these illegal operations.

The CTA requires every entity that exists to register with FinCEN. New entities that have been established in 2024 must register within 90 days of inception. By the end of the calendar year, all entities that currently exist, regardless of how long they’ve been around, need to register with FinCEN.

How to Navigate Compliance Reporting

In most cases, the actual registration of the business entity is not the challenge. What’s more complex and time-consuming is that whenever a change in ownership occurs, the registration with FinCEN must be updated.

This can be a major change, such as a change in ownership, but some experts anticipate that even minor changes will need to be reported. For example, if a business owner has an address change, changes their name due to marriage or divorce, or even gets a new driver’s license, they may be required to report it and update their registration with FinCEN. Additionally, when someone new begins making substantial decisions for the company, even if they are not an official owner, that may require a report update.

For companies that have been around for a long time, finding the information required to register in the first place might be difficult. Especially because some of the details that need to be reported are not something that business owners always track, it may take some serious legwork to gather the appropriate information to file their report. Particularly if a business has been around for decades, going back to its inception and correctly reporting ownership changes throughout the course of its lifespan can take a lot of time and resources.

Regardless of how long a business has been around, it’s important to start sooner rather than later when it comes to gathering information and preparing a report. It can take a while to get all the info you need, so start getting it together now, but wait to actually submit the information until toward the end of the year.

Legal Guidance from CPMT

While the title of this act makes it sound like only larger corporations will be impacted by it, the truth is that all businesses, regardless of their size, need to register in order to maintain compliance. While it may be simpler for smaller businesses, it still needs to be done. To get legal advice, guidance, or assistance in maintaining compliance with the Corporate Transparency Act, get in touch with CPMT today.