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Tax Blog

The Corporate Transparency Act

The Corporate Transparency Act (CTA) was passed in 2021 but did not come into effect until January 1, 2024. It is important to note that nonexempt entities that exist before the effective date do not need to adhere to their reporting obligations until December 31, 2024. The main objective of the CTA is to prevent illicit actors from concealing or profiting from their unlawfully acquired assets through entities like shell companies. To achieve this goal, nonexempt entities are required to disclose information regarding their "beneficial ownership" to the FinCEN BOSS database. It is crucial to highlight that companies that were established after January 1, 2024, have a ninety-day window to submit their information to FinCEN BOSS. Whereas the companies formed on or after January 1, 2025, must file a detailed report within thirty days of their formation.

Beneficial ownership information only needs to be reported once, unless the information reported needs to be corrected or updated. Typically, the information provided on behalf of each beneficial owner includes the name, date of birth, address, and an identifying number from a U.S. passport, driver’s license, or other identification document issued by the State.

Understanding the complexities of this act and its possible ramifications is crucial for small businesses. Otherwise, they risk facing legal consequences, whether it is in the form of criminal charges or civil penalties, for failing to submit or revise their documentation.




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