1. What is the Corporate Transparency Act?
Enacted by Congress under the National Defense Authorization Act, the Corporate Transparency Act (CTA) established a federal framework requiring small domestic US businesses and foreign entities operating in the US to disclose Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN), a bureau of the US Department of the Treasury.
The primary objective of the CTA is to combat illicit finance, tax evasion, money laundering, and terror financing by removing anonymous shell company structures in the United States.
2. Identifying Beneficial Owners (25% & Control Rule)
FinCEN defines a Beneficial Owner as any individual who, directly or indirectly:
Rule 1: Substantial Control
Senior officers (CEO, President, CFO, COO, General Counsel) or individuals with decision-making power over major business expenditures and legal decisions.
Rule 2: 25%+ Equity Ownership
Any individual who owns or controls 25 percent or more of company ownership interests (shares, stock, options, or profits).