Why This Matters
Not long ago, a foreign individual could form or register a company in the United States with minimal disclosure. In many cases, public filings did not require identifying the real people behind the entity. Once the company was formed and routine tax filings and annual state reports were completed, most owners reasonably believed their compliance obligations were complete.
That assumption is no longer correct.
Beginning in 2024, the Corporate Transparency Act (CTA) introduced a new federal reporting requirement that applies to most companies connected to the United States. The law applies broadly and quietly, and many business owners—particularly those outside the U.S.—remain unaware that they are already subject to it.
This article provides a high-level overview of what the CTA is, who it applies to, and why early awareness is essential.
What Is the Corporate Transparency Act?
The CTA is a U.S. federal law designed to increase transparency around company ownership and control. It requires most U.S. and U.S.-connected entities to report Beneficial Ownership Information (BOI) to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
The focus is not on business activity or revenue—but on people.
What Information Must Be Reported?
Companies must report information about individuals who:
- Own significant interests in the company,
- Exercise substantial control over the company, or
- In certain cases, receive substantial economic benefits.
These reporting obligations often extend beyond day-to-day managers and may include foreign owners, parent-company stakeholders, or senior decision-makers located outside the United States.
Who Is Affected?
The CTA applies to both:
- Domestic entities formed in the United States (such as LLCs and corporations), and
- Foreign entities formed outside the U.S. but registered to do business in any U.S. state.
For foreign-owned businesses, this commonly includes U.S. subsidiaries and foreign parent companies registered in the U.S.
Consequences of Non-Compliance
Failure to comply with the CTA can result in:
- Daily monetary penalties,
- Accumulating fines over time, and
- Potential criminal exposure in cases of willful non-compliance.
These penalties apply even if a company has no revenue, no tax issues, or minimal operations. CTA compliance is separate from tax compliance and must be addressed independently.
Why Foreign-Owned Companies Face Greater Risk
Foreign-owned businesses often face additional challenges, including:
- Complex, multi-layer ownership structures,
- Different definitions of ownership and control across jurisdictions,
- Cross-border data privacy considerations, and
- Missing U.S. identification numbers (such as ITINs), which can delay reporting.
Early planning is critical to avoid last-minute compliance issues.
Key Takeaway
The Corporate Transparency Act marks a fundamental shift in U.S. company reporting. The greatest risk for many business owners is not complexity—but lack of awareness.
Awareness today can prevent unnecessary risk tomorrow. If you are planning to form or register an entity in the United States, early guidance matters. We help clients manage the process from start to finish—addressing ownership disclosure, compliance obligations, and structural considerations from day one.
Contact us to discuss how we can support you from zero to one, with clarity and confidence.
