On the most recent CPMT podcast, we sat down with Doug Wessinger and Ritesh “Tesh” Patel, who are some of our most experienced CPMT team attorneys, to discuss the Corporate Transparency Act and the important changes in policy that it has brought about.
As of January 1, 2025, the Corporate Transparency Act, or CTA, is in full effect, and if you’re a business owner, you may be impacted.
What Is the CTA?
The Corporate Transparency Act (CTA) is a law designed to prevent illegal activities like money laundering and tax evasion.
It does this by requiring certain businesses to report information about the individuals who own or control them, as well as those who are responsible for filing this information.
Passed as part of the Anti-Money Laundering Act of 2020, the CTA aims to make corporate ownership more transparent in order to cut down on white-collar crime.
Which Companies Need to Report?
Any entity that is considered a “reporting company” must comply to the policies laid out by this law.
These are businesses that are created by filing paperwork with a state or tribal government.
Foreign businesses registered to operate in the U.S. also fall under this category.
However, some businesses are exempt.
The most common types of exemptions are the large operating company exemption and the subsidiary exemption.
The former applies to companies with more than 20 full-time employees, a physical office located within the United States, and at least $5 million in gross revenue.
The latter, on the other hand, applies to those bodies that are totally owned by one or more exempt entities.
What Information Must Be Reported?
The CTA revolves around reporting information about two types of people involved in a company.
The first group is “beneficial owners,” and the second is “company applicants.”
Beneficial Owners: This refers to any individual who owns at least a quarter of a reporting company and exercises substantial control over that company. Trusts, corporations, and other entities of this nature may not be considered beneficial owners.
Company Applicants: This refers to the individual who is responsible for filing the documentation related to the creation of a domestic reporting company or the registration of a foreign reporting company, or the individual who oversees this process if more than one person is involved in the filing.
Businesses required to comply with the CTA must provide the following details about their beneficial owners and company applicants:
Full legal name
Date of birth
Current residential or business address
A unique identifying number, such as one from a government-issued ID (e.g., passport or driver’s license)
What Are Some Concerns About CTA?
The CTA has not been without its challenges. There are three major issues that it has run up against.
Privacy Concerns: Critics worry that requiring personal information about beneficial owners could lead to breaches of privacy or misuse of sensitive data.
Compliance Burden: Small businesses without extensive resources might find the reporting process confusing or costly.
Legal Challenges: Some have argued that the law is unconstitutional. A federal court even temporarily halted enforcement in late 2024, though this decision has since been appealed.
What Comes Next?
The original deadline was January 1, 2025, but it was extended to January 13, 2025.
Non-compliance could have serious consequences for the success of your company, so if you have not explored your company’s legal obligation to abide by the Corporate Transparency Act, get in touch with the CPMT team today.
We’ll help you navigate these changes and more!