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What is the Corporate Transparency Act?

The Corporate Transparency Act (CTA) is a significant piece of legislation passed in the United States as part of the National Defense Authorization Act (NDAA) for Fiscal Year 2021. The CTA aims to combat illicit activities like money laundering, terrorist financing, tax fraud, and other financial crimes by increasing transparency of corporate ownership. Here are the key points about the Corporate Transparency Act:

  • Beneficial Ownership Reporting:

    The CTA requires corporations, limited liability companies (LLCs), to report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). A beneficial owner is defined as an individual who owns or controls at least 25% of the company or exercises substantial control over the company.

  • Details to be Reported: The information that needs to be reported includes the name, date of birth, address, and a unique identifying number from an acceptable identification document (like a passport or driver's license) for each beneficial owner.

  • Reporting Timeline: Newly formed entities must file beneficial ownership information upon formation, while existing entities are required to report within two years of the enactment of the regulations implementing the CTA.

  • Fines and Imprisonment: Companies that fail to comply with the reporting requirements or provide false information may face civil penalties up to $500 per day and criminal penalties including fines up to $10,000 and imprisonment for up to two years.

  • Watch video below where Brian Nelson, The Undersecretary for terrorism and financial intelligence at the U.S. Treasury Department, explains everything you need to know about the CTA and BOI.

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