What Maryland Business Owners Should Know About The New Corporate Transparency Act
Along with surprise medical bills, shell corporations could soon be a thing of the past. A shell corporation is a company that appears to belong to no one, sometimes because its dealings are so shady that no one wants to claim responsibility for it. People have set up shell corporations (or perhaps more accurately, had other companies set them up) either to hide assets from creditors or ex-spouses or to distance themselves from nefarious financial transactions. A new law requires more transparency from businesses about the identity of the humans connected to them. This law will make it much harder for companies and their owners to hide their actions behind shell corporations. To find out more about the responsibilities you and your business will have under the new Corporate Transparency Act, contact a Maryland business law attorney.
About the Corporate Transparency Act
The Corporate Transparency Act (CTA) went into effect as part of the 2021 National Defense Authorization Act; it is a federal law. Its purpose is to prevent money laundering and similar financial crimes. The law will make it more difficult for business entities to operate as shell corporations, the actions of which are untraceable to the human beings that actually control the corporations.
Pursuant to the new law, almost every business must submit a report to the United States Department of Treasury, furnishing information about the owners and major decision makers of the company. The deadline for submitting the report is January 1, 2022. After that, you only need to update the report if and when any of the information in it changes. The report must include the following information about every person who owns 25 percent or more of the company and every person authorized to make major decisions on the company’s behalf:
- Full legal name
- Date of birth
- Residential postal address
- ID number on a government-issued document such as a driver’s license or passport
What the Corporate Transparency Act Does Not Do
Not every company is required to submit a report to the Department of Treasury, only the ones with a gross annual income of at least $5 million and the ones that employ 20 or more workers. Even if your company is required to submit a report, this does not mean that the information will become publicly searchable. (Would anyone choose to be an entrepreneur if it meant making your address and driver’s license number visible to the whole world?) In fact, the Department of Treasury can only share the information with law enforcement, prosecutors, and judges in the United States and some foreign countries, and only after these parties submit a formal request including an explanation of how they plan to use it (for example, in a criminal investigation about money laundering).
Let Us Help You Today
A Washington DC small business lawyer can help you file or update your CTA disclosures report and prepare or review any other legal documents your business needs. Contact Tobin, O’Connor & Ewing for help today.