CTA – A New Reporting Burden For Small And Medium Businesses

At the beginning of, 2021, Congress slipped the so-called Corporate Transparency Act "CTA"), a new business reporting obligation, into the National Defense Authorization Act of 2021. Among other things, the CTA requires every corporation and LLC as well as other entities that meet a definition of a "reporting company" to make a filing with the Department of Treasury's Financial Crimes Enforcement Network ("FinCEN") to identify its "beneficial owners". The Act also imposes severe penalties for a failure to comply with this new reporting obligation.

Although it is scheduled to be effective in less than a year (on Jan. 1, 2022), multiple questions remain. Notably, the CTA does not define a number of key terms, and also does not provide details on the reporting process, relying on the Department of Treasury to promulgate implementing regulations and other guidance from expected from FinCEN.