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Cracking Down on Anonymity: The CTA's Disclosure Requirements


A person with their head covered


On January 1, 2021, a new law called the Corporate Transparency Act (CTA) was passed. The CTA is designed to make sure people can't hide their money laundering and tax evasion behind secret companies. The CTA says that these secret companies need to declare who their owners are and when there's a change in ownership. It will also create a national list of these companies and their owners.


The CTA affects all businesses registered in the United States, including domestic and foreign corporations, limited liability companies (LLCs), and limited partnerships. It does not apply to sole proprietorships or dormant LLCs."


"The real owners of a business are called "beneficial owners." Beneficial owners are the people who own or control 25% or more of the business interests, even if they don't own it on paper, e.g., Trusts, Individual IRAs, etc.


The CTA requires businesses to report the following information about their beneficial owners:

  • Full name

  • Date of birth

  • Address

  • U.S. passport number or driver's license number

Businesses must also report any changes to this information within 30 days.


A business owner

The CTA has a broad reach and is complex. If you are a business owner, consult an attorney or accountant to determine how the CTA applies to you.


No action is needed until January 1, 2024, and businesses started before that date have until January 1, 2025, to report beneficial ownership information.


Businesses started after January 1, 2024, must report their CTA requirements and beneficial ownership information within 30 days of filing an entity with their respective State.


Here are some examples of how the CTA might affect businesses:

  • A small business owner who owns her company outright would need to report her name and address as a beneficial owner.

  • A group of investors who own a company through an LLC would need to report the names and addresses of all the investors who own at least 25% of the company.

  • A trust that owns a company would need to report the names and addresses of the trust beneficiaries with the right to control the trust.


Failure to comply with the CTA can result in severe penalties, including fines and imprisonment.

According to Attorney Garry Louima of First Step Legal Solutions, "the goal of the CTA is to increase financial transparency and bolster anti-money laundering efforts. Failure to comply with the CTA may result in civil and even criminal penalties, including a $500 fine for continuing violations up to $10,000 and 2 years imprisonment. There are exceptions to the reporting requirements for entities such as banks, publicly traded companies, tax-exempt entities, and large operating companies that have more than 20 full-time employees, a physical office within the U.S. with gross receipts or sales over $5,000,000.00."


He says that "the CTA will assist the government in its anti-money laundering efforts and crime prevention. However, the reporting requirement adds another burden on American business owners. It is a matter of awareness. Many business owners are unaware of the CTA but may be held liable for the penalties involved in non-compliance. Another issue with the CTA is privacy. FinCEN plans to engage in more rulemaking to formulate policy and procedures for third parties who want access to beneficial ownership interest information of a company."

There are still unanswered questions revolving the privacy of business owners under the CTA, however business owners will be required to comply under the CTA. We must stay vigilant as the FinCEN makes developments with the CTA in order to conduct our businesses uninterrupted."

If you have any questions about the CTA and how it could impact your business, please contact Mr. Louima here.

As a business owner, you should take the necessary steps for compliance with the CTA before the deadline is essential.


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AIPSNY Founder bio

 

First Step Legal Solutions, PLLC. was founded in 2018 by Garry B. Louima, Esq. He believes that the American Dream is still possible. As a child of immigrant parents, Garry has watched his parents and other family members pursue and obtain their version of the American Dream, through business ownership.

There are obstacles every business owner must overcome to achieve their American Dream, but with the help of a dedicated lawyer, those obstacles become easier to overcome. Garry's mission is to help people pursue and protect their version of the American Dream by providing quality legal services and business consultation.

He loves working with small business owners and fighting to see their vision come into fruition. Whether you are starting a business, protecting your business from a lawsuit, or need a lawyer for legal advice and clarity concerning your business, Garry wants to be the First Step you take to resolving your problem and answering your questions.

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