One of the biggest open secrets for family enterprises in the US in 2023 is the impact of the Corporate Transparency Act (CTA). In the first part of this article, we discussed the technical requirements of the CTA. In this second part, we will discuss the impact that CTA reporting will have both for US businesses and foreign firms doing business in the US.
Reviewing the Basics of the Corporate Transparency Act
The CTA requires existing and future companies, either formed or registered to do business in the US, to electronically file a report with the Financial Crimes Enforcement Network (FinCEN) of the US Treasury Department. These reports will file into an as-yet-nonexistent database of individuals who are direct or indirect beneficial owners of the reporting company, as well as individuals reporting the information for the reporting company. Companies must provide beneficial ownership information (or “BOI”) and keep that information up to date going forward. The intent of the law is to allow governments and agencies access to beneficial ownership of companies to combat money laundering in the US.
Existing reporting companies, as defined by the CTA, must report before January 1, 2025. Companies that are formed or registered to do business in the US after January 1, 2024, must report within 30 days of the date of formation or registration to do business in the US.
Each report must identify each direct or indirect beneficial owner of the reporting company, and newly formed or registered companies also need to identify their company applicant. Each BOI report must include the full legal name, date of birth, residential street address, a unique identifying number,1 and an image file of the document that provides the unique identifying number for both the beneficial owners of the company and the company’s applicant. Once a report is filed, a reporting company must file an amendment within 30 calendar days after any item of previously reported information changes.
Although the Treasury Department has stated that gathering and reporting this information is no greater burden than applying for a library card, these new requirements will impose unique burdens on family-owned businesses.
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