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What should I know about the exceptions to the Corporate Transparency Act?

On Behalf of | Jan 31, 2024 | Business Law

Congress enacted the Corporate Transparency Act (CTA) as part of the Anti-Money Laundering Act of 2020. Lawmakers designed this new law to serve as a significant step toward preventing money laundering, terrorist financing, and other illicit activities.

What is the CTA?

This relatively new federal law can impact local business owners here in Ohio, those who operate throughout the nation, and even on a global scale. The CTA requires certain business entities to disclose information about their beneficial owners. It is important for business owners to comply with the new law as failure to do so can come with steep penalties, including financial as well as potential allegations of criminal wrongdoing.

It is important to note that not all business entities will need to submit the Beneficial Ownership Information Report. There are exceptions to this rule designed to reduce the burden on certain types of entities.

Does my business need to comply with this new law?

It is wise for business owners, especially those with LLCs or corporations, to gather information about the exceptions to understand their reporting obligations under the CTA. There are currently 23 exemptions. These include:

  • Investment companies,
  • Insurance companies,
  • Accounting firms,
  • Tax-exempt entities, and
  • Subsidiaries of certain exempt entities.

It is important to note that the specifics of each exemption should be reviewed in the context of the Act’s detailed provisions.

Understanding the exceptions to the CTA is crucial for LLC and corporation owners to determine their compliance requirements. The exemptions focus the CTA’s reporting requirements on entities that may pose a higher risk for illicit activities due to a lack of transparency. It is wise to consult with a legal expert to help better ensure you are in full compliance with the CTA. Staying informed about your legal obligations under the CTA will help you avoid potential penalties and contribute to the broader fight against financial crimes.