What is the Corporate Transparency Act in the U.S.?

Enacted as part of the 2021 National Defense Authorization Act, the Corporate Transparency Act (CTA) aims to close legal loopholes that allow anonymous entities to conceal their true ownership.

In this article, we’ll explore in detail what the Corporate Transparency Act is, who is required to comply with it, what information must be reported, and the penalties for non-compliance.

What is the Corporate Transparency Act?

The Corporate Transparency Act (CTA) seeks to increase transparency in corporate structures and combat money laundering, terrorism financing, and other illicit activities by requiring detailed information about beneficial owners to be reported to the Financial Crimes Enforcement Network (FinCEN).

A beneficial owner is any individual who directly or indirectly owns or controls a significant percentage of a company. Under the CTA, this includes anyone who:

• Owns at least 25% of the company’s ownership.
• Exercises substantial control over the company through other means.

Who Must Comply with the Corporate Transparency Act?

Entities Required to Comply

Most businesses, including small and medium-sized enterprises (SMEs), are required to comply with the CTA. This includes:

• Corporations
• Limited Liability Companies (LLCs)
• Other entities created or registered to do business in the U.S.

Exemptions

Some entities are exempt from the reporting requirements under the CTA. These exemptions include:

• Regulated financial institutions
• Publicly traded companies
• Government entities
• Large companies with more than 20 employees and over $5 million in annual revenue

What Information Must Be Reported?

Beneficiary Information

Businesses must report the following information about each beneficial owner:

• Full legal name
• Date of birth
• Residential or business address
• Identification number (e.g., Social Security number or passport)

Reporting Deadlines

Businesses must submit this information to FinCEN within 30 days of the entity's creation or any change in beneficiary information. Existing businesses must comply with these requirements before January 1, 2024.

Penalties for Non-Compliance

Non-compliance with the CTA can result in significant penalties, including:

• Civil Fines: Up to $500 per day for each day the required information is not submitted.
• Criminal Penalties: Fines of up to $10,000 and/or up to two years in prison for those who intentionally provide false or misleading information.

Impact on Latin American Businesses

Challenges for Latin American Businesses

Latin American businesses operating in the United States may face unique challenges in complying with the CTA, including language barriers and a lack of knowledge about the new requirements. It is crucial for these businesses to seek legal and accounting advice to ensure compliance.

Potential Benefits

Despite the challenges, the CTA can also offer benefits to Latin American businesses by creating a more transparent and trustworthy business environment. Transparency can enhance the reputation of businesses and facilitate access to financing and other business opportunities.

How to Prepare for Compliance with the Corporate Transparency Act

Internal Assessment

Businesses should conduct an internal assessment to identify all beneficial owners and gather the necessary information. This process may involve reviewing corporate records and communicating with shareholders.

Professional Advice

At Prodezk, we understand the complexity of the Beneficial Ownership Information (BOI) reporting requirements and are here to help you comply with all regulations. If you have questions about how to file the BOI report, contact us and receive free advice from our expert team.

The Corporate Transparency Act represents a significant change in how businesses must report and manage information about their beneficial owners. While compliance may seem challenging, especially for small and medium-sized businesses and Latin American businesses, it is crucial to prevent penalties and improve transparency in the business environment.

At Prodezk, we have simplified the process of filing the Beneficial Ownership Information (BOI) report to make it easy and hassle-free. Our specialized team will guide you through every stage of the process, ensuring accurate and timely submission. Contact us to get started and fulfill your compliance obligations in the easiest way possible.