At Buttonwood Financial Group, we are committed to providing our clients with proactive wealth management strategies and remaining informed of the latest developments in the financial landscape. One such development that will have a significant impact on businesses and individuals alike is the Corporate Transparency Act (CTA). While dating back to 2021, the CTA becomes effective January 1, 2024, and has far-reaching implications for businesses. In this blog post, we summarize the key aspects of the CTA and explain how the Act may affect you and your business.

What is the Corporate Transparency Act?

The Corporate Transparency Act (CTA) is a federal law aimed at enhancing corporate transparency in the United States. It was signed into law on January 1, 2021, as part of the National Defense Authorization Act (NDAA) for Fiscal Year 2021. The CTA establishes new reporting requirements for certain business entities to prevent the illicit use of anonymous shell companies for money laundering, terrorism financing, tax evasion, and other illegal activities. The official website for CTA is the FinCEN website with a direct link here: Beneficial Ownership Information Reporting | FinCEN.gov

Key Provisions of the CTA

1. Reporting Beneficial Ownership Information: Under the CTA, certain business entities, including corporations, limited liability companies (LLCs), and similar entities, are required to report information about their beneficial owners to the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN). Beneficial owners are individuals who directly or indirectly own or control 25% or more of the entity.
2. Registration with FinCEN: Covered entities must submit this beneficial ownership information to FinCEN upon formation or registration, and any subsequent changes to this information must be “promptly reported.” Existing companies have one year from January 1, 2024 to file a Beneficial Ownership Information report. Newly formed or registered companies must file within either 30 days or 90 days of the registration or formation date.
3. Access to Beneficial Ownership Information: FinCEN will maintain a confidential database of beneficial ownership information. Access to this information will be restricted to law enforcement agencies, financial institutions conducting due diligence, and other authorized entities for specified purposes.

Who Is Affected by the CTA?

The CTA applies to a wide range of business entities, including:

• Corporations (both domestic and foreign)
• LLCs
• Limited partnerships
• Business trusts
• Similar entities formed under state law

Exemptions from the CTA include publicly traded companies, registered investment companies, and certain other entities that are already subject to robust reporting requirements.

How Does the CTA Impact You?

1. Compliance Requirements: If you are a business owner or executive, it is essential to understand whether your entity falls within the scope of the CTA and ensure compliance with its reporting requirements. Failing to do so could result in significant penalties.
2. Increased Transparency: The CTA aims to increase transparency in corporate structures, which may have implications for mergers and acquisitions, due diligence processes, and compliance with anti-money laundering (AML) regulations.
3. Privacy Concerns: Some individuals and businesses may have privacy concerns related to the disclosure of beneficial ownership information. It is crucial to strike a balance between transparency and privacy within the bounds of the law.

The Corporate Transparency Act represents a significant shift in the regulatory landscape, emphasizing transparency and accountability in corporate structures. As your Family CFO, Buttonwood Financial Group is dedicated to helping you navigate these changes effectively. If you have any questions or concerns about the CTA and its impact on your business, please schedule a consultation or reach out to your Advisory Team for a conversation.