Privacy has become a hallmark aspect of business entities in the United States. Corporations, partnerships, limited liability companies (LLCs), and similar entities provide a notable amount of privacy. Wealthy families in search of privacy often use business entities to hold investments, planes, boats, and real estate. This privacy has at times been used for secrecy by those looking to launder money, avoid taxes, and finance illegal activities. In response to these illicit activities, in 2021 Congress enacted the Corporate Transparency Act (CTA). The CTA is the most significant piece of anti-money laundering legislation since the Patriot Act in 2001.
The principal objective of the Corporate Transparency Act is to create a national database, overseen by the Financial Crimes Enforcement Network (FinCEN), containing certain identifying information on the individuals who, directly or indirectly, own or control certain types of domestic and foreign entities. Under the CTA and as described in the final regulations, a “Reporting Company” will be required to provide certain identifying information on (i) the entity itself, (ii) its “Beneficial Owners,” and (iii) “Company Applicants.” The identifying information to be reported on a Reporting Company will include, without limitation, its legal name, any DBAs associated with it (a DBA, or “doing business as,” refers to when the company conducts business under a name other than its legal name), identifying tax information, and contact information. The identifying information to be reported on Beneficial Owners and Company Applicants will include, without limitation, legal name, date of birth, a physical contact address, and additional identifying information and documentation.
With the Corporate Transparency Act set to go into effect in 2024, it is important to understand the operative provisions of this new law, importantly, how a "Reporting Company," "Beneficial Owner," and "Company Applicant" will each be defined.
Please see important disclosures at the end of the article.