Navigating the Corporate Transparency Act: A Roadmap to Proactive Compliance

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In a recent webinar, we explored the ins and outs of the Corporate Transparency Act (CTA), offering a roadmap to proactive compliance. With speakers Angelo Mazzella, Managing Director of Business Development​, and Mark Bradley, Relationship Manager, from EntityKeeper, we addressed key components of the CTA, discussed compliance strategies, and highlighted the role of technology in simplifying the process. Keep reading to uncover the key insights and takeaways.

Watch the on-demand webinar now. Or, keep reading for an overview of our conversation. 

Understanding the Corporate Transparency Act

Implemented on January 1, 2021, the CTA empowers the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) to regulate beneficial ownership reporting for domestic and foreign legal entities. Its primary objective is to enhance transparency by requiring entities to disclose information about their beneficial owners and company applicants in order to prevent corrupt actors, terrorists, and criminals from laundering money in the U.S. 

The CTA is not just another regulatory requirement; it’s an initiative impacting countless organizations across the country – over 32 million companies will need to file in 2024, according to FinCEN. (Click here to see if your firm is a reporting company and for a complete list of exemptions!) Organizations must act now to avoid potential penalties and ensure operational continuity. But remember, compliance isn’t a one-time task – it should be an ongoing initiative.

Beneficial Owner vs. Company Applicant

Understanding the distinction between a beneficial owner and a company applicant is crucial for navigating the requirements of the Corporate Transparency Act effectively. 

Beneficial Owner

A beneficial owner is defined as any person who either directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise:

  • Exercises substantial control over the reporting company; or
  • Owns or controls at least 25% of a reporting company’s ownership interests.

Company Applicant

For a domestic reporting company, a company applicant is any person who files the document that forms the entity. For a foreign reporting company, a company applicant is any person who files the document that first registers the company to do business.

In both categories, any individual who directs or controls the filing of the relevant document by another is also considered a “Company Applicant.” This distinction clarifies the roles and responsibilities of individuals involved in the formation or registration of entities, ensuring compliance with CTA reporting requirements. 

Required Information for Reporting

Beneficial Owners and Company Applicants must provide detailed personal information, including full names, dates of birth, addresses, and unique identifying numbers. Additionally, reporting companies must furnish their full names, addresses, IRS Taxpayer Identification Numbers, and other relevant details.

To learn more about CTA Requirements, read our blog for a step-by-step guide to determine what your company should do to avoid non-compliance! 

Recent Requirement Changes

Deadlines for filing vary based on the creation dates of entities. For instance, entities established before January 1, 2024, have until January 1, 2025, to file, whereas those formed after January 1, 2025, must file within 30 calendar days of creation/registration.

Strategies for CTA Compliance

Non-compliance with the CTA can lead to significant penalties. Civil penalties of up to $500 per day can accrue for each day the violation continues. Additionally, criminal penalties may apply, including fines of up to $10,000, imprisonment for up to two years, or both. These consequences underscore the importance of diligently adhering to CTA requirements.

Proactive CTA Compliance in 5 Steps

A proactive approach to CTA compliance involves several key steps:

  1. Assess whether your business is obligated to file a CTA report.
  2. Determine if any exemptions apply to your entity.
  3. Identify beneficial owners and company applicants accurately.
  4. Gather all required information meticulously.
  5. Implement a robust document tracking system to ensure compliance deadlines are met.

Leveraging Technology for Compliance

When it comes to mandates like the CTA, having the right tools can make compliance more manageable. Entity management software, such as EntityKeeper, provides organizations with the capabilities to streamline compliance efforts, centralize data, and ensure accuracy in reporting.

Technology plays a vital role in simplifying compliance efforts:

  1. Track filing deadlines and receive automated alerts to stay on schedule.
  2. Centralize information and documents for easy access and retrieval.
  3. Clarify roles, document processes, and adopt entity management software to streamline compliance tasks effectively.

During the webinar, Mark Bradley emphasized the importance of filing and continuity planning. Jokingly, he posed the questions: “What would happen if someone abruptly left your organization? Would everything else still go as planned? Would your organization still be in compliance and in good standing with the state?” Mark highlighted how EntityKeeper and its notification features provide reassurance in such scenarios. With proper documentation and accessible information, organizations can ensure continuity even in unforeseen circumstances.

Next Steps: Watch the Webinar On-Demand

To gain deeper insights into CTA compliance and learn how a solution such as EntityKeeper can revolutionize your entity management and compliance processes, we invite you to watch the webinar on-demand. Stay proactive, stay compliant, and have peace of mind with the knowledge and tools necessary to navigate the Corporate Transparency Act.

Remember, remaining vigilant about recent regulatory changes is critical. Stay informed by monitoring reliable sources such as the FINCEN website or partner with EntityKeeper for ongoing support and guidance! 

Proactive compliance not only ensures adherence to regulatory requirements but also fosters operational efficiency and mitigates risks. Watch the webinar today and equip your organization with the expertise and resources needed to navigate the Corporate Transparency Act.