9 FAQs About the Corporate Transparency Act (CTA)

The Corporate Transparency Act (CTA) will take effect soon. Is your business prepared?

It’s essential for laws to undergo frequent changes and revisions in order to keep up with the rapid technological advancements that affect our economy. Luckily, you don’t have to navigate them alone. Contact us online to schedule a complimentary case evaluation .


As experienced business attorneys in Seattle, we’ll be the first to tell you that the law is imperfect. Sometimes a new law will create positive changes in one aspect and unforeseen drawbacks in another. The new
Corporate Transparency Act (CTA) is one of those laws.


Although the CTA was designed to combat money laundering and fraud, achieving and maintaining compliance may be burdensome to some companies, especially small- and medium-sized businesses. As attorneys, it’s our job to help you navigate these new legal waters and circumvent pitfalls when possible.


If you’re concerned about how the Corporate Transparency Act may affect your business, this article is for you. In it we will answer nine of the most frequently asked questions about the CTA, including who must report, reporting requirements and the best ways to protect yourself.

1. What Is the Corporate Transparency Act (CTA)?

The CTA is a wide-reaching, bipartisan law that is estimated to impact around 32.6 million businesses . Although the CTA was enacted by Congress on January 1, 2021, it won’t come into full effect until January 1, 2024. It mandates the Financial Crimes Enforcement Network (FinCEN) to create a secure, non-public database to which certain businesses will report a variety of identifying information.

2. What’s the Purpose of the CTA?

The CTA was designed to provide law enforcement with beneficial ownership information to aid in its fight against terrorism, money laundering and other types of misconduct that are accomplished via business entities. Beneficial ownership information refers to various types of identifying information about individuals who own (directly or indirectly) or run a company.

3. Who Is Required to Report?

Any business that is considered a reporting company will need to file a beneficial ownership information report with FinCEN. There are two main types of reporting companies: domestic reporting companies and foreign reporting companies.


Domestic reporting companies include corporations, LLCs and any other business entity created by filing documents with a secretary of state or similar office. Foreign reporting companies are businesses formed under the law of a foreign country that have registered to conduct business in the U.S. by filing the same type of documents as their domestic counterparts.

4. Who Is Eligible for Exemption?

According to FinCEN, there are 23 types of business entities that are exempt from reporting. Non-reporting entities include publicly traded companies that meet specified criteria, a large portion of nonprofits and some large operating companies. For example, banks and credit unions, insurance companies, certain companies registered with the SEC and some tax-exempt entities are not required to report to FinCEN under the CTA.

5. When Are Reports Due?

If a reporting company existed (was created or registered to do business) before January 1, 2024, it has one year (until January 1, 2025) to file an initial ownership information report . However, a company that is created or registered on or after January 1, 2024 only has 30 days from when its business registration becomes effective to file an initial report.

6. What Are the Reporting Requirements?

The CTA requires anyone who has substantial control over or owns 25 percent or more of a reporting business’s equity to report certain identifying information. This beneficial owner information includes full legal name, date of birth, residential physical street address and the image of an acceptable government-issued ID. Beneficial owners are required to keep their identifying information up-to-date with FinCEN on an ongoing basis.

7. What Are the Potential Penalties for Reporting Violations?

If a beneficial owner disregards their ownership obligations, they may face steep civil and criminal penalties. Failure to comply with reporting requirements may result in escalating fines of $500 per day up to $10,000 per violation. Noncompliance can also result in up to two years of jail time if the beneficial owner fails to timely and properly comply with CTA requirements.

8. Who Will Have Access to the BOSS Database?

Filings must be submitted through an electronic interface to FinCEN’s online database, “Beneficial Ownership Secure System” (BOSS). FinCEN will allow local, Tribal, State and Federal officials to access the database, as well as certain foreign officials who submit an official request. In certain situations, FinCEN will also allow financial institutions and their regulators to access BOSS data.

9. What Steps Can I Take to Protect Myself?

If you’re a beneficial owner of a company, it’s important to start looking into CTA requirements now. It’s a good idea to work closely with a Washington business attorney to determine whether the CTA applies to you and whether you qualify for an exemption. If you do need to report, your attorney can help you explore the best process for gathering the necessary information and understand how it will be reported and the best ways to monitor it in the future.

By Design Law: Trusted Legal Advocates Serving the Seattle Business Community

Although the CTA offers law enforcement another tool with which to fight money laundering, fraud and other types of misconduct, it also carries potentially negative ramifications for business owners. Critics warn that this broad-reaching law may result in the prosecution of individuals who had no intent to violate the law and may not have understood its vague and complicated rules.


If you’re unsure whether or not you’ll be required to report under the CTA, it’s in your best interest to speak with a business attorney right away. Fortunately, you don’t have to search too far:
By Design Law offers full-spectrum legal services for Washington businesses of all sizes.


Ready to get started?
Schedule a complimentary consultation with us online.

Facebook
LinkedIn

Our Blog​

Related News and Articles