A perennial problem for all national governments is preventing criminals from accessing money and the financial systems which grant them access to sources of funding. And while the United States already has numerous regulations designed to stop crooks from using the international banking system, malign actors continue to find ways around these regulations. That is why, as a part of the Anti-Money Laundering Act of 2020, Congress enacted the Corporate Transparency Act.

The Corporate Transparency Act (“CTA”) created a new reporting regime for nearly all corporations, limited liability companies, and similar entities which do business in the United States. In broad strokes the CTA requires that certain “Reporting Companies” submit information identifying all “Beneficial Owners” to the U.S. Treasury Department, thereby ensuring that no bad actors are benefiting from companies operating in the U.S. economy.

The CTA involves two key terms, which are defined as follows:

• “Beneficial Owner” – An individual who (1) directly or indirectly exercises substantial control over the entity or (2) owns or controls 25% or more of the entity.
• “Reporting Company” – A corporation, limited liability company, or other similar entity (1) that was created by filing a document with a secretary of state or (2) that was formed under the laws of a foreign country and is registered to do business in the United States. The CTA also contains a list of twenty-four exceptions to the definition of “Reporting Company”.

 

REPORTING COMPANIES

Pursuant to an Interim Final Rule published on March 21, 2025, Reporting Companies fall into two categories: Domestic Reporting Companies and Foreign Reporting Companies.

Domestic Reporting Companies can be defined as all corporate entities created in the United States. Pursuant to the Interim Final Rule, Domestic Reporting Companies are exempt from the reporting requirements of the CTA.

Foreign Reporting Companies can be defined as all corporate entities formed under the laws of a foreign country that have registered to do business in any U.S. State or Tribal jurisdiction. Pursuant to the Interim Final Rule, Foreign Reporting Companies are required to comply with the reporting requirements of the CTA.

All homeowners’ associations, condominium associations, and cooperative associations in the State of Florida are required to be organized as corporations registered with the State of Florida. Accordingly, all community associations are Domestic Reporting Companies and are exempt from the reporting requirements of the CTA.

 

BENEFICIAL OWNERS

Foreign Reporting Companies are required to report certain information about their Beneficial Owners to the federal government – but what exactly is a “Beneficial Owner”?

There is little disagreement that the directors and officers of a board are considered Beneficial Owners under the CTA. In every corporate entity these individuals are the people making important decisions about the company – in other words, they are “exercising substantial control over the entity”. Similarly, members of committees that make important decisions about how the company is run would be considered Beneficial Owners for purposes of the CTA.

Additionally, anyone that holds more than twenty-five percent (25%) of the total ownership interest of a Foreign Reporting Company is also considered a Beneficial Owner under the CTA.

But what about a high-level employees? Are they also Beneficial Owners because they exert control over the company? The CTA’s definition of “Beneficial Owner” specifically excludes “an individual acting solely as an employee [] and whose control over or economic benefits [are] derived solely from the employment status of the person”. In most circumstances, employees are not classified as Beneficial Owners under the CTA.

 

BENEFICIAL OWNERSHIP INFORMATION REPORTING

Foreign Reporting Companies must submit certain specified information for each individual determined to be under the “Beneficial Owner” umbrella. Foreign Reporting Companies that currently exist are required to submit their first report no later than April 20, 2025. Beneficial Ownership reporting includes each Beneficial Owner’s:

• Full legal name;
• Date of birth
• Current residential or business address; and
• A copy of identifying documentation (passport or state-issued driver’s license).

The actual information being reported is not particularly contentious, however, it is easy to imagine some Beneficial Owners will push back on producing the required identifying documentation. Unfortunately this is a requirement and Beneficial Owners will have no choice but to provide all information requested under the CTA or face enforcement by the federal government.

Of course, who constitutes a Beneficial Owner may change over time. Any Foreign Reporting Company that experiences changes to its Beneficial Owners is required to file an updated report within thirty (30) days of that change.

 

ENFORCEMENT

The Congress was serious about cutting down on money laundering and the funding of terrorist organizations and the penalties for violating the CTA reflect this seriousness.

Providing inaccurate information when reporting Beneficial Owner information or failing to provide Beneficial Owner information are both violations under the CTA. Additionally, failure to provide a timely update to changes in Beneficial Ownership is a violation of the CTA. Penalties for violating the CTA include fines up to $10,000.00 and up to two (2) years imprisonment.

 

CONCLUSION

For several years the business world expected the Corporate Transparency Act to be a major administrative burden, cumulatively costing corporations hundreds of millions of dollars. With the deadline looming, many trade groups and companies filed lawsuits against the U.S. Department of Treasury seeking to have the CTA ruled unconstitutional. These lawsuits and changes in federal guidance created a confusing regulatory landscape that resulted in confusion and conflicting expectations of how the law would be enforced.

At the last minute, with the publication of an Interim Final Rule on March 21, 2025, the U.S. Department of Treasury altered the CTA to make it inapplicable to the vast majority of business that operate in the United States. Whereas everyone from mom-and-pop restaurants to gigantic corporations were previously expected to be impacted by these regulations, now only Foreign Reporting Companies will be required to comply.

All of the anxiety that the CTA produced ended up being much ado about nothing.

That being said, the CTA still presents a regulatory burden for Foreign Reporting Companies. If you have questions about the current version of the CTA, or if you believe your company may be classified as a Foreign Reporting Company, it would be wise to contact competent legal counsel for advice.