On January 1, 2021 Congress passed the Corporate Transparency Act (“CTA”) which will require most U.S. small corporations and limited liability companies to disclose to the federal government information concerning the beneficial ownership of the entity – that is, the persons who actually own and control the business entity.  The government will be allowed to disclose this information for authorized law enforcement, national security or intelligence purposes, but it will not become public, nor can it be requested under the Freedom of Information Act.  The CTA is designed to ban the anonymous shell companies that criminals and certain foreign officials use to hide corrupt monies and investments.

This new requirement will also affect many individuals because it is increasingly common for homes and investments to be purchased and owned by single-purpose entities for tax and privacy reasons.  Most of these entities will be required to disclose the beneficial ownership information to the Financial Crimes Enforcement Network (“FinCEN”) upon formation.  Existing entities will also have to file this information within two years after final federal regulations implementing the new law become effective.  

Required compliance with the CTA does not start until January 2022 and the specifics of the beneficial ownership reporting requirements will be contained in regulations to be issued by the United States Department of Treasury later this year.  All companies potentially subject to the CTA should assess their situation and, where appropriate, enhance their compliance processes to verify that the required information is being collected so that it can be reported to FinCEN in accordance with the CTA.  For more information, please contact Thomas J. Walsh, Jr. (twalsh@brodywilk.com) or another BW attorney.