In a notable development for legal professionals globally, the Corporate Transparency Act (the “CTA”) will roll out its reporting requirements starting January 1, 2024. As outlined by Arnall Golden Gregory LLP, this legislation mandates that each “reporting company” disclose specific details relating to the entity itself, its “beneficial owners”, and “company applicants” to the Financial Crimes Enforcement Network (“FinCEN”).
Corporations and LLCs formed under U.S. state or tribal law, or foreign companies registered to do business in the U.S., come under the definitional scope of “reporting companies”. Exemptions exist for several entities, including those larger in size, already government-regulated, or dormant.
“Beneficial owners”, in the CTA context, typically refer to individuals who exercise substantial control over a reporting company or own or control at least 25% of its ownership interests. Notably, this excludes creditors, minors, individuals acting solely as employees, or those whose only interest is through a right of inheritance.
The registrant submitting the filing represents a “company applicant”, which, for the most part, constitutes the categories of beneficial owners.
This legislation is a significant development in improving corporate transparency and fighting money laundering, fraudulent business activities, and other forms of financial crime. Legal researchers and corporate lawyers need to familiarize themselves with these changes, ensuring the businesses they represent are compliant ahead of the effective date.