The Impact Of The Corporate Transparency Act On Small Businesses

Decoding The Corporate Transparency Act: Implications & Challenges For Small Businesses

The Corporate Transparency Act (CTA) is a new law that was enacted as part of the National Defense Authorization Act for the Fiscal Year 2021. The CTA requires certain companies to disclose their beneficial ownership information to the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN). This article will examine the CTA and its potential impact on small businesses.

What Is The Corporate Transparency Act?

The Corporate Transparency Act is aimed at preventing money laundering and terrorism financing by requiring certain companies to disclose their beneficial ownership information to FinCEN. Beneficial ownership refers to the individuals who own or control a company, rather than the company itself.  Even a person who is not an actual owner can be a “beneficial owner” if they (or an entity they control) have the ability to direct a company or receive profit-like payments from the company. If you are concerned about the impact of the Corporate Transparency Act on your business, contact our business lawyers in Avondale.

Under the CTA, companies that are formed or registered to do business in the US and meet certain criteria must disclose their beneficial ownership information to FinCEN. The criteria include:

• The company is a corporation, limited liability company (LLC), or other similar entity.
• The company is not an exempt entity, such as a publicly traded company or a financial institution.
• The company has either 20 or fewer employees or annual gross receipts of less than $5 million.

The CTA requires companies to disclose the following information:

• The name, date of birth, and address of each beneficial owner.
• The identification number, such as a driver’s license or passport number, of each beneficial owner.
• A statement describing the nature and extent of each beneficial owner’s ownership or control of the company.

The information disclosed to FinCEN will not be made publicly available and will only be accessible by law enforcement and certain other government agencies. Ensure your business is compliant with the Corporate Transparency Act. Reach out to our Chandler business lawyers today.

Timeline For Compliance Requirements

Companies have until January 1, 2024, to comply with the new reporting requirements. However, the US Treasury Department has not yet issued regulations detailing how companies should comply with the CTA. The regulations are expected to be issued in the coming months, and companies will have a certain amount of time after the regulations are issued to comply with the CTA.

The regulations will likely provide guidance on how companies can submit their beneficial ownership information to FinCEN, as well as how companies can update their information if there are any changes in their ownership or control. The regulations may also provide guidance on penalties for noncompliance with the CTA.

Impact Of CTA On Small Businesses

The CTA will have a significant impact on small businesses, particularly those that are closely held or family-owned. These businesses may not have the resources to comply with the reporting requirements, and the reporting requirements may also expose their ownership information to the public.  Companies that are required to report under the CTA can use a third-party provider, such as an accountant or attorney, to submit their beneficial ownership information to FinCEN—of course, that would be another expense for companies to absorb. Don’t let the Corporate Transparency Act overwhelm your small business. Get expert legal advice from our business lawyers in Gilbert.

Some argue that the CTA may benefit small businesses by leveling the playing field and preventing larger companies from engaging in money laundering and other illegal activities and that the CTA may also increase public trust in small businesses by making it more difficult for individuals or entities to hide their ownership of a small business. Most small business owners are likely to be unconvinced that these benefits are worth the additional regulatory burden.

Get In Touch With An Experienced Business Lawyer In Arizona

The Corporate Transparency Act is a new law aimed at preventing money laundering and terrorism financing by requiring certain companies to disclose their beneficial ownership information to FinCEN. The CTA will have a significant impact on small businesses, particularly those that are closely held or family-owned. However, the CTA includes several provisions aimed at minimizing the burden on small businesses. Companies have until January 1, 2024, to comply with the new reporting requirements, but the US Treasury Department has not yet issued regulations detailing how companies should comply.

If you need assistance navigating the Corporate Transparency Act or have concerns about its impact on your business, please don’t hesitate to reach out to our experienced attorneys at Denton Peterson Dunn. We are here to help you understand and comply with the CTA requirements. Feel free to contact us.

 

Brad Denton – Denton Peterson Dunn

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