Lack of transparency is part of the mystique of business.  All those expense accounts, but whose labor pays for them and who benefits from their purchases?  Plenty of entrepreneurs dream of living large with money that technically does not belong to a human being.  All of this lack of transparency has a dark side, though.  The businesses that ostensibly belong to no one keep their money even when the economy tanks, millions of people lose their jobs, and the small business owners whose income is just barely too high to qualify for a stimulus check still have to pay 30 percent of their income in self-employment taxes.  The current system makes it easier for unscrupulous businesspeople to launder money than it is for law enforcement to discover money laundering.  A recently enacted law requires almost all businesses to provide information to the Department of Treasury about the individuals who own the companies and make decisions on their behalf.  A Birmingham business law attorney can help you comply with this and other corporate laws.

What Is the Corporate Transparency Act?

The Corporate Transparency Act (CTA) is a provision of the 2021 National Defense Authorization Act.  It is a federal law, which means that businesses in every state, including Alabama, must comply with it.  Its goal is to make it impossible for companies to operate as “shell corporations” not tied to identifiable individuals, thereby preventing financial crimes such as money laundering.  In order to achieve this goal, it requires all businesses that have at least 20 employees or a gross annual income of at least $5 million to provide disclosures about the identities of their owners and decision makers by January 1, 2022.

You must provide disclosures to the Department of Treasury about the identity of every person who owns at least 25 percent of the company, as well as every person who has a major decision-making role in the company’s operations.  You must provide the following information about each person:

  • Full legal name
  • Date of birth
  • Permanent residential address (not a business address or P.O. box)
  • a government-issued ID number such as a driver’s license number or U.S. passport number

If any of the information changes, such as if one partner sells their interest in the company, or if the company hires a new senior manager, you must submit a new report to the Department of Treasury with the updated information.

You might worry that disclosing this information to the Department of Treasury might leave business owners vulnerable to identity theft, but the CTA also strictly limits the parties to which the Department of Treasury can disclose the information and the circumstances under which they can disclose it.  The Department of Treasury can only share the information with law enforcement, prosecutors, or judges who have formally requested it in the context of an investigation.

Let Us Help You Today

An Alabama business & corporate litigation attorney can help you comply with the CTA and any other new business laws that go into effect.  Contact Cloud Willis & Ellis for help with your case.