The Corporate Transparency Act (CTA) requires companies to provide the US Treasury Department with information about those starting or benefiting from a wide range of businesses. But the law also includes many exemptions that may spare your company from this obligation.
What is the CTA?
The CTA has reporting requirements for nearly every small business organized or registered in the US using any limited liability entity. Those companies regulated by the CTA must submit identifying information concerning those with beneficial ownership and individuals who started their formation and domestic registration to the US Treasury Department’s Financial Crimes Enforcement Center (FinCEN).
These reporting requirements take effect when CTA regulations become final (Update: beginning January 1, 2024). The CTA aims to improve the enforcement of anti-money laundering laws by creating a national registry of reporting companies’ beneficial ownership information.
Which Business Must Report Beneficial Ownership and Applicant Information?
A “reporting company” is any limited liability company, corporation, or similar entity that is:
Created by filing a formation document with a secretary of state or similar office, or
Formed under foreign laws and registered to do business in the US
Domestic reporting companies include:
- Limited partnerships
- Limited liability partnerships
- Limited liability limited partnerships
- Business trusts
Under these broad categories, thousands of companies will need to file, but the CTA also includes numerous exemptions.
Is My Business Exempted By the CTA From Reporting Requirements?
The CTA lists 23 different types of exempt entities. One of them is large operating companies that:
- Employ more than 20 people full-time in the US
- Reported more than $5 million in gross receipts or sales on the previous year’s federal income tax return
- Have an operating office in the US which it owns or leases, and is not a residence or shared with another business
“Inactive” entities are exempted if such they existed on or before January 1, 2020, and they:
- Are not actively engaged in business
- Are not owned by a foreign person in any way
- Have not changed ownership in the previous 12 months
- Have not sent or received funds more than $1,000 directly or through a financial account in the prior 12 months
- Do not hold any assets
CTA also excludes entities operating in heavily regulated industries and others, including:
- Banks
- Domestic credit unions
- Securities issuers
- Money transmitting businesses
- Registered investment advisors
- Insurance companies
- Public utilities
- Entities owned or controlled by one or more non-reporting entities
- Securities issuers
- Domestic government authorities
- Depository institution holding companies
- Securities brokers and dealers
- Securities exchange or clearing agencies
- Other Securities Exchange Act of 1934 entities
- Registered investment companies and advisers
- Venture capital fund advisers
- Insurance companies
- State-licensed insurance producers
- Commodity Exchange Act registered entities
- Accounting firms
- Financial market utilities
- Pooled investment vehicles
- Tax-exempt entities and entities assisting them
- Subsidiaries of some exempt entities
If your business falls into one of these exemptions, but due to changes in the organization you’re no longer exempt, your company must comply with the CTA.
If you are still confused about whether or not you are exempt from filing, take our quiz here.
CTA Filer Can Help You and Your Company
You could spend time and effort reviewing hundreds of pages of the CTA, related federal laws, and CTA’s regulations, plus keep track of changes and any court decisions impacting them. But you have better things to do like running a business. Let us help you navigate the CTA and simplify its reporting process.
We offer easy, online filing with step-by-step instructions. Our prices are far less than what your attorney or accountant will charge. Our annual monitoring can help you stay in compliance to avoid penalties for not filing the required information on time.
If you want to stay informed about all the changes regarding the CTA, visit our homepage to sign up to our email list today.
