United States took a significant step toward increasing corporate transparency with the full implementation of the Corporate Transparency Act (CTA). Originally passed as part of the National Defense Authorization Act in 2020, the CTA is designed to combat money laundering, terrorist financing, and the abuse of shell companies used to conceal illicit financial activity. The new regulations, which went into effect on June 28, 2025, require most U.S. businesses to disclose detailed information about their beneficial owners.
This is a landmark moment in the history of U.S. corporate law. The CTA aims to provide law enforcement with the information needed to identify the individuals who ultimately control and profit from companies, especially those that have been used for illegal or corrupt purposes. The act requires companies, including limited liability companies (LLCs) and corporations, to report the names, addresses, and identifying information of individuals who own or control more than 25% of the company.
Key Provisions of the Corporate Transparency Act
Under the new regulations, most companies must submit detailed reports to the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury Department, that include the names, addresses, dates of birth, and government-issued identification numbers (such as passports or driver’s license numbers) of the beneficial owners. These reports will be confidential, accessible only to authorized government agencies for use in investigating criminal activities, including fraud, tax evasion, and corruption.
Certain larger businesses, particularly publicly traded companies and those with substantial operations, are exempt from the reporting requirements. However, the CTA targets smaller, privately held companies—often those that have historically been used to hide illicit financial activity—requiring them to be far more transparent about their ownership structures.
Impact on Small and Medium-Sized Enterprises (SMEs)
For many small and medium-sized enterprises (SMEs), the implementation of the CTA will require adjustments in business operations. Companies will need to establish systems for identifying and reporting beneficial owners and ensure that this information is kept up to date. The CTA also mandates that companies update their filings annually or whenever there is a change in ownership.
One of the most significant impacts of the CTA will be on businesses that have traditionally used complex ownership structures or shell companies to avoid scrutiny. By requiring these companies to disclose their beneficial owners, the law aims to eliminate the anonymity that has allowed some entities to be used for illegal activities such as money laundering and tax avoidance.
Challenges for U.S. Businesses and Legal Professionals
The rollout of the Corporate Transparency Act is expected to present challenges for businesses, particularly those that operate in industries with complex ownership structures. Corporate lawyers and compliance professionals will play a critical role in ensuring that businesses understand and comply with the new regulations. Companies may need legal counsel to help them identify their beneficial owners, gather the necessary documentation, and submit the required reports to FinCEN.
“The CTA represents a significant shift in how businesses must operate and maintain transparency in their ownership structures,” said Michael Herrington, a corporate attorney based in Washington, D.C. “For many companies, particularly those with multiple ownership layers or foreign investors, compliance with these requirements will require significant changes to their governance and reporting practices.”
The law has also raised concerns regarding the potential burden on small businesses. Some business owners have expressed frustration at the increased administrative costs and compliance requirements. However, many legal experts believe that the long-term benefits of improved transparency outweigh the short-term challenges.
The Role of Legal and Compliance Professionals
For corporate lawyers, the CTA presents an opportunity to play a crucial role in helping businesses navigate the new landscape of corporate transparency. Legal professionals will be responsible for ensuring that their clients comply with the law, advising them on how to implement new reporting procedures, and handling any potential challenges that may arise in the process.
“Corporate lawyers will be integral in helping businesses navigate this new environment,” said Susan Greer, a corporate law partner at a major firm in New York. “Companies will need guidance on everything from determining beneficial ownership to ensuring that they don’t violate the confidentiality provisions of the law.”
Looking Forward: The Future of Corporate Transparency
As the U.S. continues to grapple with issues of financial transparency and accountability, the Corporate Transparency Act represents a critical step forward in addressing the abuse of shell companies and illicit financial activity. The law’s full implementation in 2025 is expected to have a profound impact on the way businesses operate and on the overall landscape of corporate law in the United States.
For businesses, the CTA will likely lead to greater scrutiny of corporate ownership structures, pushing companies toward more transparent and ethical business practices. Over time, the law may help to foster greater trust in U.S. financial markets, improving the integrity of corporate governance across the country.
