Why Nearly Every Business Should Care About the Corporate Transparency Act

The Corporate Transparency Act (CTA) is a new anti-money laundering bill enacted by Congress. Rulemnaking for the CTA is being handled by the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). The CTA is aimed at taking out illegal business and financial practices such as shell companies intended to hide crime and corruption. In its current form, the CTA would implement reporting requirements for domestic businesses and foreign businesses registered to do business in the U.S. This information would be used to verify beneficial ownership information and ensure compliance with “national security, economic fairness, and the integrity of the U.S. financial system.”

The CTA is a part of the Anti-Money Laundering Act, which was passed by Congress in 2020. While the CTA’s rule-making process is still underway, it’s important for all non-exempt businesses to be aware of its progression and how it will ultimately impact business operations.

Reporting requirements

All non-exempt entities will need to file identifying information including the legal name, birthday, address, and an acceptable form of identification of all beneficial owners of the entity. If someone other than a beneficial owner files the paperwork, this person will also be required to fill out this information.

Beneficial owners are defined in the act as anyone who has substantial control over the company and/or anyone who owns at least 25% of the company. This means company owners, officers, executives, and senior board members are responsible for disclosing this information.

Your business should be thorough and honest about anyone who qualifies under the definition of the act and submit the reporting requirements to FinCEN once the rule is finalized and in effect which will be determined at a later date. Your file will also need to be updated within 30 days of any changes to the previously-reported information. Corrections are due within 14 days after incorrect information is discovered.


There are few exemptions to this rule. Exemptions generally include entities that already fulfill the requirements of the act under other strict federal regulations.

The only exemption that falls outside of those standards is one for “large operating companies.” These companies are defined by three specific standards:

  • More than 20 full-time employees in the U.S.
  • Filed federal income tax returns in the previous year showing more than $5,000,000 in gross receipts or sales in the aggregate
  • Has an “operating presence at a physical office within the United States”

To qualify for the last standard, the company must own and operate a physical office space that is not shared by any other company except affiliated entities.

Your attorney should be aware of the new reporting requirements and can guide you through both the requirements and exemptions. At CLARK.LAW, we understand the future of business law. We want to be a part of your company’s growth and help you avoid costly mistakes. Contact our offices today to stay up-to-date on any new developments with the Corporate Transparency Act.

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