Are You a Business Owner? What You Need to Know About the Corporate Transparency Act
What You Need to Know About the Corporate Transparency Act and Beneficial Ownership Reporting
Estate planning often involves more than just wills and trusts - it also encompasses strategies for protecting and managing business interests. If you own a small business or are part of a closely held entity, it's time to familiarize yourself with the Corporate Transparency Act (CTA) and its new reporting requirements for beneficial ownership. Here's a quick breakdown of what this means and how it may impact you as a business owner or someone involved in estate planning.
What Is the Corporate Transparency Act?
The Corporate Transparency Act (CTA) is a federal law designed to combat money laundering, fraud, and other illegal activities. It requires certain businesses to report information about their “beneficial owners” to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.
Under the CTA, a "beneficial owner" is someone who either:
Owns or controls at least 25% of the company, or
Exercises substantial control over the company.
This information will be kept in a confidential database, accessible only to authorized government agencies and financial institutions.
Does the CTA Apply to You?
If you own a small business, chances are the CTA applies to you. Most limited liability companies (LLCs), corporations, and similar entities must comply with the law, including those used for estate planning purposes. There are some exceptions to the reporting requirements, such as:
Larger companies with more than 20 employees and over $5 million in revenue.
Entities already subject to strict regulatory oversight, such as banks.
However, for small businesses - including family-owned businesses, holding companies, and entities commonly used in estate planning -compliance is likely required.
What Information Must Be Reported?
Businesses subject to the CTA must file a report with FinCEN disclosing the following:
The full legal name, date of birth, address, and an identification document (e.g., passport or driver's license) of each beneficial owner.
Information about the company itself, including its name, address, and the type of legal structure.
For new entities formed after January 1, 2024, the report must be filed within 30 days of the company’s formation. Existing businesses must file their initial reports by January 1, 2025.
How Does This Impact Estate Planning?
For those engaged in estate planning, the CTA adds an extra layer of consideration when creating or managing business entities such as LLCs or family holding companies. Without proper planning, non-compliance with the CTA could expose your family and your assets to unnecessary risk. Additionally, the CTA reporting requirements can impact how business assets are transferred to heirs or beneficiaries. A well-prepared estate plan ensures that these reporting obligations are addressed while maintaining your long-term goals of asset protection and legacy planning.
How We Can Help
The Corporate Transparency Act may seem daunting, but with the right guidance, it can be seamlessly integrated into your estate plan. Don't wait until it's too late - reach out to On Point Estate Law at (619) 273-3329 or schedule a call here to safeguard your family's future. 📲
