Taylor Legal Blog

What is the Corporate Transparency Act and Why do I Care? [VIDEO]

Posted by Katherine L. Taylor, Attorney and CPA, Chief Problem SolverAug 02, 20230 Comments

{3.5 minutes to read}   As a business owner, have you heard of the Corporate Transparency Act? And are you wondering if it applies to you and your business? This article will briefly explain the Act and why you need to know about it. Spoiler alert: if you own a small business, get ready to comply. 

First, what is the Corporate Transparency Act (CTA)? It is an Act, or more accurately, a part of a larger piece of legislation, passed by the US Congress on January 1, 2021. At the time, we were in the middle of the pandemic, which is probably one reason people didn't hear about it. It flew under the radar with everything else going on in the world. It is part of an overall piece of legislation called the National Defense Authorization Act (NDAA), which is passed every year.

So, what does this mean for you and your small business? The purpose of the CTA is to provide information about the owners of businesses to the US Department of Treasury's Financial Crimes Enforcement Network (FinCEN). The Act requires most small businesses to report to FinCEN the owners and the beneficial owners of the business as well as their contact information, addresses, etc. (A beneficial owner is broadly defined as anybody who has control over the business. It could be somebody who may not be a shareholder or a member of an LLC but is managing the business.)

What is the purpose of this Act? It was put into place for the Department of the Treasury but is used by other law enforcement agencies throughout the United States as well, so they can get information about who is behind many businesses being formed and operated in the United States. It's essentially an anti-terrorism, anti-fraud Act.

This is a major change for numerous small businesses because, in many states, the owners of a business are not required to be reported to the state. Now, we are going to have a requirement that owners, and beneficial owners of small businesses, must be reported to a government agency. The good news is that the information is not public information, stored in a database where anybody can go in and access it. However, the information will be broadly accessible to a wide range of law enforcement agencies.

If you want more information about the Corporate Transparency Act, please click the link below to receive a download that you can print out on your own and hopefully be able to understand in even more detail whether the Act is going to apply to your business, and what information you have to report.

The Act goes into effect for all businesses on January 1, 2024, so you do have some time but get the printout and get ready to comply.