Navigating the Corporate Transparency Act: What Austin Businesses Need to Know

The Corporate Transparency Act (CTA), enacted in 2021, is a game-changing piece of legislation aimed at combating money laundering, tax fraud, and other illicit activities by improving transparency around business ownership. This law requires businesses to report their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), which helps authorities trace illegal activities tied to corporate structures. 

Key Deadlines and Who It Affects

For businesses formed before January 1, 2024, the crucial compliance deadline is January 1, 2025. Businesses in operation before this date must meet the CTA’s reporting requirements or face steep penalties. 

Exemptions from the CTA

The CTA targets smaller businesses and excludes larger entities. Public companies, as well as private companies with 20 or more employees and annual revenues exceeding $5 million, are generally exempt from the CTA’s requirements. This allows larger businesses more flexibility in their operations while focusing the law on smaller, potentially less transparent companies. 

Reporting Requirements Under the CTA

Under the CTA, both domestic and foreign entities must report beneficial ownership information. These include: 

• Domestic Reporting Companies: Corporations, LLCs, and other entities formed by filing documents with a state’s Secretary of State or equivalent.

• Foreign Reporting Companies: Non-U.S. entities registered to do business in any U.S. state.

Who Are Beneficial Owners?

A beneficial owner is defined as anyone who, directly or indirectly, exercises substantial control over a company or owns at least 25% of the company’s ownership interests. It’s not enough to look at a company’s capitalization table; businesses must assess who controls the company on a case-by-case basis. 

Consequences of Non-Compliance

Failure to comply with the CTA can lead to severe consequences. Companies that willfully fail to report accurate beneficial ownership information can face daily fines of $500, up to a maximum of $10,000, as well as the possibility of up to two years in prison. 

Recent Updates and Legal Challenges

A significant update came on March 21, 2025, when the U.S. Department of the Treasury announced an interim final rule that fundamentally alters the scope of the CTA. This rule exempts U.S. entities from reporting beneficial ownership information to FinCEN, essentially removing the requirement for domestic companies to file. 

However, foreign entities doing business in the U.S. are still required to report their beneficial ownership under the CTA. This change means that U.S. businesses no longer need to worry about submitting ownership details, a relief for many domestic entities. 

The Treasury’s interim final rule appears to conflict with the original intent of the CTA, which aimed to enhance transparency across the board. As a result, businesses must stay informed as FinCEN’s final rule is expected later in 2025. Additionally, businesses should remain aware of potential court challenges and possible amendments to the CTA itself. 

Navigating Legislative Changes and Maintaining Compliance as a Texas Business

Although the recent changes have brought some relief to domestic businesses, navigating the intricacies of the CTA and staying compliant can be challenging. With this evolving regulatory landscape, it’s essential to consult with an experienced attorney who understands these updates and how they affect your business. 

Navigating the intricacies of such a transformative law can be daunting, but with the right guidance from an Austin business law firm like Richards Rodriguez & Skeith, you can position your business for success and compliance in the ever-evolving regulatory landscape.