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VIEWpoint Issue 1 | 2023
2023 Compliance Trends: Staying Ahead in an Evolving Regulatory E...
Enacted on Jan. 1, 2021, the Corporate Transparency Act (CTA) has brought about new owner reporting requirements that will impact small privately owned businesses organized in the United States.
Designed to create an added level of transparency to help prevent the use of U.S. “shell” companies engaging in money laundering or other criminal funding activities, the CTA mandates individual beneficial owners of corporations, limited liabilities and similar entities be reported to the federal government.
As set forth in the CTA, more than 2 million entities are formed annually under state law. Most states do not require identification of owners of these entities. While complying with the CTA will not be an issue for businesses not involved in the above illicit activities, many have legitimate privacy concerns, especially family groups, start-ups and foreign investors.
All reporting entities that are corporations, limited liability companies or similar entities that were either:
Some entities, such as banks, credit unions, investment advisors, brokers/dealers, insurance companies and charitable organizations are exempt from the reporting requirement. Businesses with more than 20 employees and $5 million in sales that have a physical presence in the United States are also exempt.
Applicable entities must submit the following information about each of their beneficial owners to the Financial Crimes Enforcement Network (FinCEN):
Beneficial owners are considered to be any individuals with substantial control over the entity, who own at least 25% of the entity or receive substantial benefits from its assets.
All information will be placed on a confidential registry maintained by FinCEN.
CTA reporting requirements have not yet been announced. Regulations must be issued by the Secretary of Treasury no later than Jan. 1, 2022.
Doeren Mayhew will keep you up-to-date on CTA reporting requirements once formal regulations are announced. Questions on how this may impact your business? Contact our CPAs and advisors today.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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