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Corporate Transparency Act

Aug. 7, 2023

The Corporate Transparency Act (CTA) is a significant piece of legislation that aims to enhance corporate transparency, prevent money laundering, and combat the financing of terrorism. Enacted on January 1, 2021, this bipartisan law has far-reaching implications for businesses across the United States.

The majority of business owners, including the real estate investors and small family businesses, will be affected by the Corporate Transparency Act (CTA). CTA, effective on January 1, 2024, requires reporting entities to disclose the information about their beneficial owners.

A beneficial owner is someone who, directly or indirectly, either (1) exercises substantial control over a reporting company, or (2) owns or controls at least 25 percent of the ownership interest of a reporting company.

What is the Corporate Transparency Act?
The Corporate Transparency Act requires certain entities, including corporations, limited liability companies (LLCs), and other similar structures, to disclose their ultimate beneficial owners (UBOs) to the U.S. Department of Treasury's Financial Crimes Enforcement Network (FinCEN). This information will be stored in a confidential database maintained by FinCEN.

Why was the Corporate Transparency Act enacted?
The primary goal of the Corporate Transparency Act is to combat illicit activities such as money laundering and terrorist financing. By requiring businesses to disclose their beneficial ownership information, the Act aims to prevent bad actors from hiding behind anonymous entities and engage in fraudulent or illegal activities.

Next week’s newsletter will discuss what the reporting requirements are and what entities are affected.

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