Corporate Transparency Act (CTA)

tysllpBusiness News, Tax Accounting

You might have heard about it, the Corporate Transparency Act (CTA), enacted in 2021, was passed to enhance transparency in entity structures and ownership to combat money laundering, tax fraud, and other illicit activities. It is designed to capture more information about the ownership of specific entities operating in or accessing the U.S. market.

The effective date of the Corporate Transparency Act is fast approaching on January 1, 2024, and people are starting to panic.

Companies are looking for more information on the Corporate Transparency Act, how it affects their operations, and what the details of the reporting requirements are. TYS is here to help advise you and your company.  

Who does the CTA affect?

According to a recent Small Business Administration report, 27,104,006 small businesses were termed “nonemployer firms” and had no employees. The Corporate Transparency Act is designed to improve business activity transparency through the reporting of Beneficial Ownership Information (BOI) and is particularly targeted to these smaller businesses.

There are two identifiers for reporting companies, either domestic or foreign. 

If you are a domestic corporations, LLPs, or any other entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe, you need to report. 

If your company is a foreign corporation, LLCs, or other entity formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office, you need to file a report. Sole-proprietorships that don’t use a single-member LLC are not considered a reporting company.

Reporting companies typically include:

  • Limited liability partnerships
  • Limited liability limited partnerships
  • Business trusts
  • Most limited partnerships, where entities are generally created by a filing with a secretary of state or similar office.

The main goal of the CTA is to find and stop the use of shell companies, which might be used for questionable financial dealings. Even though it’s aimed at stopping bad actors, the impact will be felt by every company. 

The CTA will make a centralized database with the names and contact details of the “beneficial owners”. These beneficial owners are the people who either own or have significant control over the business.

Only law enforcement, the IRS, and some other government groups can use this list. FinCEN will not share this information.  FinCEN is the Financial Crimes Enforcement Network,  a bureau of the U.S. Department of the Treasury.  It’s purpose is to safeguard the financial system from illicit use, combat money laundering and its related crimes.


Here’s why this matters to you: 

The penalties for non-compliance are harsh, including daily fines of up to $500 (capped at $10,000) and include potential criminal penalties of up to two years in prison. 

All reporting companies must file an initial BOI (Beneficial Ownership Interest) report and updated or corrected reports as beneficial owner information changes.  A “reporting company” includes (1) any corporation, LLC, limited partnership or similar entity created by filing a document with any US state, territory or Indian tribe (domestic reporting companies), and (2) any non-US entity that registers to do business with any US state, territory or Indian tribe (foreign reporting companies).  

This is a filing separate from your income tax returns and will require obtaining images of documents that prove the identity of the beneficial owners (i.e. driver license or passport).  Since this is expected to be an online filing separate from your income tax return, this is outside the scope of services provided by TYS.  We may be able to answer general questions about the filings, but we will NOT be able to prepare and file these reports for our clients.

We will continue to keep you updated as more information becomes available related to the filing process and ongoing requirements. Keep in the know and subscribe to our blog.