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Corporate Transparency Act (CTA) – The implications for US and foreign businesses operating in the US

The US Federal Corporate Transparency Act (CTA) took effect on January 1, 2024. The CTA represents a significant shift in the regulatory landscape concerning corporate ownership transparency in the United States. The primary objective of this legislation is to combat money laundering, terrorist financing, and other illicit activities facilitated by the misuse of corporate structures, by mandating that current and new businesses registered in the United States disclose their direct and indirect owners.

Key Provisions of the Corporate Transparency Act:

  1. Reporting Requirements: Under the CTA, “Reporting Companies” who are required to file beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) include US-formed entities as well as foreign entities registered to do business in the US. US entities include corporations, limited liability companies (LLCs), and other entities who are required to file with a secretary of state or similar office. Foreign reporting companies include entities formed under the law of a foreign country but who are registered to do business in the US. Reporting requirements include details about individuals who directly or indirectly own or control 25% or more of the Reporting Company’s ownership interests.
  2. Exemptions: While many entities are subject to reporting requirements, some businesses are exempted from compliance. These exemptions include, inter-alia, certain publicly traded companies, large operating companies with more than 20 full-time employees and over $5 million in gross receipts or sales and US operations, and a number of regulated entities such as financial institutions.
  3. Penalties for Non-Compliance: Failure to comply with the reporting requirements of the CTA may result in significant penalties, including fines and potential criminal liability for willful violations.
  4. Implementation Timeline: The CTA imposes a phased implementation approach, with the specific timeline for compliance varying depending on the date of formation of a Reporting Company. For example, an entity which was formed or registered to do business prior to January 1, 2024, will have until January 1, 2025 to file its initial report. New entities formed on or after January 1, 2024 and before January 1, 2025, will have 90 days following their formation to report. Entities formed on or after January 1, 2025, will have 30 days to report following their formation. It is crucial for affected businesses to stay informed about their respective compliance deadlines and take appropriate steps to ensure timely and accurate reporting.


Implications for Your Business:

Given the complexities and potential legal ramifications associated with the CTA, business owners should be proactive in assessing their obligations under the new law and take measures to ensure compliance. This may involve conducting internal reviews of corporate structures, identifying beneficial owners, and preparing and submitting the required reports to FinCEN.

Our team is available to provide guidance, answer questions, and offer tailored solutions to ensure compliance with this important legislation.

The review was written by Galit Farkash, Partner in ERM’s Corporate and M&A and High-Tech Departments.

* This newsletter is provided for informational purposes only, is general in nature, does not constitute a legal opinion or legal advice and should not be relied on as such. If you are seeking legal advice, it is essential to review the specific facts of each case in detail with a qualified lawyer.



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