Don’t let the name fool you—the Corporate Transparency Act is aimed at small businesses.
As the legal landscape surrounding data privacy continues to evolve, you need to partner with a law firm that adapts with the times. Contact By Design Law to schedule a consultation with one of Seattle’s top business attorneys and ensure your legal compliance.
As a business owner, it’s your responsibility to stay up-to-date on laws and regulations that pertain to your company. And while not every new business law that gets passed will affect your business, others can have a massive impact on your operations, reporting obligations, and legal compliance.
The Corporate Transparency Act (CTA), which went into effect on January 1, 2024, is perhaps the most consequential business law passed in decades. It is expected to impact over 32 million small- and medium-sized businesses during its first year and an additional five million businesses within 10 years.
The CTA was passed by Congress in 2021 as part of the National Defense Authorization Act. Its purported aim is to combat illicit activity such as tax fraud, money laundering, financing for terrorism, drug operations, etc., by capturing more ownership information about U.S. businesses. The methods by which the CTA accomplishes this, however, have been criticized as highly invasive, and the penalties for non-compliance—even accidental—are severe.
If you’re a small business owner in Seattle, you may be assuming this law doesn’t apply to you. Don’t let the name fool you: This law is not aimed at large corporations (many of which are exempt from reporting requirements), but at small companies of various business structures. As an entrepreneur, it’s critical to familiarize yourself with the key tenets of the CTA and to understand how it impacts you.
This article will explain everything you need to know about the Corporate Transparency Act, who it affects, how it affects them, and why you need to work closely with an experienced Seattle business attorney to ensure legal compliance.
Are you concerned about what the CTA means for you? Failure to act could result in massive fines and even jail time, so don’t hesitate— contact By Design Law online to discuss your options with a trusted business attorney.
Key Aspects of the Corporate Transparency Act
As we touched on previously, the CTA’s mission is to combat illegal activity by capturing more ownership information about U.S. businesses. By requiring businesses to submit their owners’ personal information, the CTA can theoretically prevent illegal activity from occurring in the shadows. However, eliminating anonymity comes at a cost, namely to entrepreneurs.
The CTA is a complex, detailed piece of legislation that is difficult to unpack without legal assistance. Here’s a breakdown of its key features:
- Beneficial ownership reporting. The CTA requires certain U.S. companies (mainly LLCs, corporations, and similar entities) to report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). The beneficial owner is anyone who owns or controls the company in a significant way or who has at least 25% ownership.
- Reporting companies. Reporting companies are businesses that are required to report ownership information to FinCEN under CTA requirements. The act primarily targets small, privately owned corporations, LLCs, and similar entities—especially those that operate in a relatively unregulated industry. Larger, publicly traded companies are generally exempt.
- Information requirements. Beneficial owners of reporting companies must provide their names, dates of birth, addresses, and identification numbers (such as a driver’s license or a passport number) to FinCEN.
- Updating information. Beneficial owners of reporting companies are responsible for updating their personal information with FinCEN within a specific time frame.
- Access to information. The beneficial owner information that FinCEN collects will be accessible to federal law enforcement agencies and, in some cases, to financial institutions.
- Penalties for non-compliance. The CTA imposes civil fines of $500 per day , per violation. It also allows for a criminal penalty of up to two years in prison for violations, including deliberate failure to report.
- Privacy protections. Data protection measures include restricting access to beneficial owner information, establishing protocols to ensure online data privacy and cybersecurity, imposing penalties for unauthorized disclosure, and limiting access to certain purposes.
The specific ways in which the CTA may apply to you and your business can be difficult to determine without legal assistance. The best way to get answers is by speaking with an experienced Seattle business lawyer.
How Will the CTA Impact My Business?
If you’re like most business owners in Seattle, you need to know how the CTA will affect your ability to own and operate your company. Unfortunately, there is no one-size-fits-all answer—your obligations will depend on the specific circumstances of your situation.
That being said, most small- and medium-sized businesses that are required to report to FinCEN should be aware of potential pitfalls. The CTA may cause challenges in the following areas:
- Compliance . Strict adherence to the reporting requirements is essential if you want to avoid severe penalties. Although new reporting requirements went into effect on January 1, 2024, businesses that existed before that date have one year to file initial reports. Businesses created or registered on January 1, 2024, or later have 90 days to file.
- Operational impact. Businesses must maintain up-to-date information about beneficial owners at all times, updating this information with FinCEN whenever information changes. For this reason and others, the CTA may force businesses to change internal record-keeping and reporting processes to remain in compliance.
- Privacy concerns . Beneficial owner information will be accessible to various entities through access to an online database.
Depending on the nature of your business and its unique characteristics, maintaining compliance under the CTA may require significant restructuring of operations. Critics of the CTA believe that the operational impact of this law may put undue financial strain on small businesses.
How an Experienced Business Attorney Can Help
Navigating the complexities of the Corporate Transparency Act can be extremely difficult to do alone. If your business is classified as a reporting company, the best way to protect your interests and ensure legal compliance is by working closely with a dedicated business attorney.
Here are some of the legal services they can provide:
- Guidance on compliance
- Interpretation of the CTA’s applicability to you
- Assistance identifying beneficial owners
- Ensuring timely, accurate reporting of ownership information
- Oversight of the submission process and required documentation
- Evaluating potential risks and offering best practices to mitigate them
- Legal defense for businesses accused of CTA violations
- Advising on data privacy and cybersecurity measures
- Ensuring compliance with both the CTA and privacy laws
Remember: Not every business attorney is equally capable of navigating compliance with the CTA. The best attorney for you is one with expertise in corporate law strategy, proactive compliance, and data privacy law. Luckily, you don’t have to look too far.
By Design Law: Custom-Tailored Legal Services for the Seattle Business Community
As leading business and corporate law attorneys in Seattle, we’ve helped countless business owners ensure legal compliance and the peace of mind they deserve. With expertise in data privacy law, our business lawyers are uniquely qualified to help you navigate your CTA requirements. Ready to get started? Contact us online to schedule a consultation today .
