Insights and Resources

The Corporate Transparency Act: The New Rulebook for Reporting Companies

ARTICLE | June 03, 2024

The Corporate Transparency Act (CTA), which went into effect on January 1, 2024, has introduced sweeping changes to the financial landscape. Designed to combat financial crimes such as money laundering, the CTA requires companies that qualify as "reporting companies" to disclose certain information about their "beneficial owners" to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. 

A beneficial owner, as per the CTA, is an individual who either directly or indirectly exerts significant control over a reporting company or holds a minimum of a 25% stake in the company's ownership interests. This law has significant implications for corporate trustees who may be required to reveal their beneficial owners if they hold an ownership interest in a reporting company.

However, the implementation of the CTA and its subsequent Beneficial Ownership Information (BOI) reporting requirements have stirred controversy within the financial sector. Some financial institutions and societies, including the Ohio Society of CPAs and the AICPA, have voiced concerns about the rollout of the BOI, pointing to a Federal District Court ruling in Alabama that deemed the CTA unconstitutional. 

Despite the ruling and the appeal from FinCEN that followed, these organizations are recommending a suspension of BOI enforcement until all judicial proceedings surrounding the case have concluded. However, FinCEN has maintained that compliance with the BOI reporting requirements remains mandatory.

The BOI reporting requirements apply to both domestic and foreign entities registered with a U.S. state or Indian tribe. However, exceptions exist, primarily for large operating entities that employ more than 20 U.S employees, reported gross sales or revenue exceeding $5 million in the previous year's federal income tax return, and maintain a physical office in the U.S. Publicly traded companies registered under Section 102 of the Sarbanes-Oxley Act are also exempted.

Entities registered before 2024 have until January 1, 2025, to file their BOI reports. Those registered after 2023 must file their reports within 30 days, although FinCEN has proposed an extension to this deadline. Once filed, any changes or corrections to the reported information must be reported within 30 days.

The reporting entities are required to provide a comprehensive set of information, including the legal entity's name, business address, state or tribal jurisdiction of formation or registration, and IRS Taxpayer Identification Number. Additional information required includes the beneficial owners' name, date of birth, address, unique identifying number, and an image of the identification document. 

Non-compliance with the reporting requirements carries severe penalties, including civil penalties up to $500 per day and criminal penalties of up to $10,000 in fines and/or two years in prison. 

Given the complexity of the reporting requirements, it's crucial for affected entities to seek appropriate guidance. FinCEN has provided various resources including updated FAQs and compliance guides to aid in understanding these requirements. However, questions remain as to whether a CPA's involvement in preparing and/or filing these BOI reports would constitute unauthorized practice of law, making it crucial to consult with appropriate authorities for guidance. 

The implementation of CTA and BOI reporting requirements represent a significant evolution in the fight against financial crimes. Despite the ongoing debates and legal challenges, the stipulated reporting requirements provide a new level of transparency in financial transactions, thus strengthening measures against money laundering and other financial crimes. 

Sources: Seth Moen, Dvorak Law Group, Ohio Society of CPAs, AICPA, Federal District Court - Alabama.

Let's Talk!

Call us at +1 213.873.1700, email us at or fill out the form below and we'll contact you to discuss your specific situation.

  • Topic Name:
  • Should be Empty: