By: Karen J. Poist, CPA
Managing Director, State Advisory Services
Stambaugh Ness

I recently attended the AICPA National Tax Conference and if you thought the Corporate Transparency Act (CTA) was yesterday’s news, think again. With the first filing deadlines around the corner, this hot topic is back in the spotlight and clients need to get their information together now.

So, what’s the deal with the CTA? It’s part of the Anti-Money Laundering Act of 2020. This law was designed to stop financial crimes like money laundering and tax evasion. The idea is simple: increase transparency by requiring many businesses to disclose details about their beneficial owners—basically, the folks calling the shots behind the scenes. The Financial Crimes Enforcement Network (FinCEN) will use this info to maintain a federal registry.

The CTA’s requirements have sparked plenty of debate, with some courts even calling its constitutionality into question. As of now, there are several legal challenges making their way through the system, but for most of us, the answer to “Do I need to file?” is still “Yes.”

What about compliance? Small businesses are struggling with the administrative burden of figuring out what FinCEN expects and concerns about the security of the data being submitted. FinCEN promises safeguards, but it is a lot of sensitive information.

For some businesses, this is a huge lift. For others, it’s just another day in the life of compliance. Either way, understanding the basics is key.

Who Needs to File?

If a business is a corporation, LLC, or similar entity, they are likely on the hook—unless they qualify for an exemption. Public companies, banks, and certain large businesses can breathe a sigh of relief, but small and mid-sized companies will need to report. Remember, to look at the entity structure when it was organized and not the taxing status of the entity.

Who are the Owners?

Beneficial owners are those who own or control at least 25% of a company or exercise substantial control. And yes, senior officers like CEOs, CFOs, COOs, and General Counsel are considered to have substantial control—even if they don’t hold 25% ownership or any ownership.

When Are the Deadlines?

Deadlines depend on when your entity was formed:

Created in 2024: File within 90 days.

Formed on or after Jan. 1, 2025: File within 30 days.

Formed before 2024: File by Jan. 1, 2025.

If your entity dissolves in 2024, prior to the due date, the company still needs to file before wrapping up operations.

While the CTA might feel like a hassle, it has a big-picture purpose: stopping bad actors. By tracking beneficial ownership, regulators can cut down on shady activities like fraud and money laundering. It’s also a wake-up call for companies to take a closer look at their corporate governance practices.

The Corporate Transparency Act is here to stay (at least for now), and deadlines are approaching quickly. Whether navigating a complex ownership structure or just filing a straightforward report, it’s worth addressing this sooner rather than later.