By Douglas W. Clayton

The U.S. Treasury Department’s Financial Crimes Enforcement Network’s (FinCEN) rules implementing the Corporate Transparency Act (CTA) take effect January 1, 2024. The CTA is a dramatic financial disclosure law that will impact virtually every company formed in the United States. The goal of the CTA is to permit Uncle Sam and applicable law enforcement agencies the ability to “look through” corporations, limited liability companies (LLCs), and other entities to know the owners and other persons controlling those companies.

When do FinCEN’s reporting rules implementing the CTA become effective?

Any business formed in the Unites States on or after January 1 will be required to file a “beneficial ownership” report with FinCEN. Companies in existence December 31, 2023 will have until January 1, 2025, to file.

What is the purpose of the CTA?

The CTA received bi-partisan Congressional support of this legislation to combat the use of “shell companies” that hide the identity of bad actors. The CTA will shift the burden of identifying and verifying beneficial owners of companies from financial institutions to the companies.

Congress has made it a priority to combat financial crimes and prevent bad actors from harming the national security interests of the United States. The expectation is the CTA will help combat money laundering, financing of terrorism, serious tax fraud, human and drug trafficking, piracy, counterfeiting, and other serious financial crimes. For years, bad actors have formed companies to commit financial crimes and hide their identity and assets obtained from law enforcement.

What information must be reported?

The CTA will require companies to report information about each “beneficial owner,” which the CTA defines as any individual who directly or indirectly exercises “substantial control” over a reporting company or owns or controls at least 25 percent of the ownership interests of the reporting company. An individual exercises “substantial control” if he or she serves as a senior officer of the company, has authority over the senior officers or majority of the board of a company, has substantial influence over the company’s important decisions, or has any other type of substantial control over the company. The individual only has to satisfy one of these factors to be considered a “beneficial owner.”

The type of information to be reported will be identification documents, including a passport issued by the United States; an identification document issued by a state, local government, or Indian tribe; a driver’s license issued by a state; or a passport issued by a foreign government if the individual does not possess the other documents listed. The full legal name, date of birth, current business or residential address, and a unique identifying number from an acceptable document or FinCEN identifier of the beneficial owner also must be reported.

The reporting company also must submit information to FinCEN, including the entity’s full legal name, all trade names of “doing business as” (d/b/a), a complete and current address of the entity, the jurisdiction it was formed in or jurisdiction in which a foreign company first registered, and the Internal Revenue Service taxpayer identification number and employer identification number.

Which companies are required to report?

Virtually any entity that files formation documents with the Secretary of State will be required to file under the CTA. This includes corporations, limited liability companies (LLCs), limited partnership (LPs), limited liability partnerships (LLPs), and business trusts. General partnerships, estate trusts and sole proprietorships are not required to file.

Some companies that already are regulated may be exempt from reporting under the CTA, such as public companies that are registered with the Securities and Exchange Commission (SEC), governmental authorities, banks and other financial institutions, investment companies, investment advisors, securities brokerages, and venture capital funds. There is also an exemption for large operating companies that (i) have more than 20 full-time employees, (ii) had more than $5 million in gross receipts or gross sales during the previous year, and (iii) is physically located in the United States.

Who can access the reports?

The information that is reported is recognized as sensitive. Thus, it will be required to be safeguarded by FinCEN and only will be available to (i) law enforcement and other authorized government authorities that need the information to facilitate important national security, intelligence, and law enforcement activities, or (ii) financial institutions to facilitate their compliance with customer due diligence requirements related to anti-money laundering, counter-terrorism, and similar requirements under applicable law.

How do companies file reports with FinCEN?

Reporting the beneficial ownership information under the CTA will be completed electronically through a secure filing system available via FinCEN’s website. The filing system will be accessible by January 1, 2024. There will be no government filing fees associated with this filing.

Douglas W. Clayton is a Corporate and Securities Partner with Cantey Hanger LLP, where he serves as the Chairman of the firm’s Business Transactions Practice Group. He is a graduate of Harvard Law School and Texas Tech University. He focuses his practice on mergers and acquisitions, corporate finance, securities offerings, and other business transactions. For more information call 817-877-2890, visit or his blog at Mr. Clayton thanks Jazmine Nowlin for her substantial contributions in preparing this article.

This article is for information purposes only and is not intended to be legal advice or substitute for consulting an attorney. We recommend that you discuss your particular situation with your attorney when you need legal advice.