Close this search box.

The Corporate Transparency Act Is, Well, Opaque

Print Article
Corporate Transparency Act

You might not have read much about the Corporate Transparency Act (usually referred to as the CTA). The law, adopted by Congress on January 1, 2021, was part of a much bigger legislative package. Actually, its history is even more interesting than that, and worth mentioning before we describe the CTA and how it might affect you. Yes, you.

Congress first adopted the National Defense Authorization Act by lopsided votes in late 2020. It included $741 billion in defense spending and a number of other defense-related items. It also included the Corporate Transparency Act.

Then-President Donald Trump vetoed the Act on December 23, 2020. Was he concerned about the CTA? Apparently that was not his primary concern. He specifically mentioned the Defense Act’s requirement of renaming military installations still honoring Confederate officers. He also referred to what he called a “gift” to China and Russia. And he complained that big tech companies should be brought to heel by changes in the law. But the Corporate Transparency Act does not seem to have been on his — or much of anyone else’s — radar at the time.

What is the Corporate Transparency Act?

The CTA, simply described, mandates the principals behind virtually all small business entities to register with the federal government. The stated purpose? To provide a clearinghouse of information that the government can use to find money launderers, terrorism funders, crime kingpins and other bad people.

The devil, of course, is in the details. And the details are pretty devilish.

First issue: the definition of entities covered by the CTA. The definition is not yet final, but it looks like it will include all Limited Liability Companies (LLCs), Limited Liability Partnerships, Limited Partnerships (LPs, including Family Limited Partnerships), and closely-held corporations. Sub-chapter S companies? You bet. All are covered by the Corporate Transparency Act.

Second issue: who has to report? All “beneficial owners.” And that definition is very broad. It boils down to anyone who has management control or directly or indirectly owns more than 25% of the entity.

Next up: who gets all these reports? Not the FBI, or the NSA, or the Defense Department. There’s a 30-year-old agency under the Department of the Treasury you’ve never heard of. It’s the Financial Crimes Enforcement Network (FinCEN), and it expects to receive 30 million reports when final rules become effective. It anticipates 3 million new reports each year after that, too. They promise all that information will be protected, and it won’t be shared with anyone. Except law enforcement. And national security agencies.

Does every entity have to report? No. There are several exemptions. You aren’t on the exemption list, though. Most large companies won’t have to report. Why not? Apparently, they are more reliable.

Well that’s pretty scary

It might be, if the penalties are severe. But it’s just an administrative filing, right? And your best effort will be good enough?

No. The consequences are draconian. If you are supposed to report and you don’t, or if you file an inaccurate report, you are liable for up to 2 years in prison and a $10,000 fine. Oh, wait — there’s a get-out-of-jail-free card for anyone who corrects their own form within 90 days. But not if they point it out to you first.

The Corporate Transparency Act could be a huge problem for the 30-million-or-so entities that need to file within one year of its full effective date. It will also cause a major headache for many lawyers, accountants and financial advisers.

So when did this become effective?

Good news! It hasn’t become (fully) effective yet.

On December 7 last year, the FinCEN published its proposed rules for reporting. It promised to have finalized rules by the end of this year, and to give everyone one year to comply.

But the handwriting is on the federal regulatory wall. Expect to have to file for every LLC, FLP, corporation (including Sub-S) and other entity you might have created already. Even entities that you haven’t used in years, or possibly even those that have been closed down administratively, might have to file. And expect the filing to be a madhouse, since you’ll be in line with about 30 million others.

What does this have to do with my estate plan?

Oh, we are so happy you asked. Do you have rental real estate held in an LLC? Or maybe three LLCs, each holding a separate property? Or a partnership with your brother? Maybe a vacation cabin you own with your sister? Each of those may require you to file — as well as your brother and your sister.

And as your lawyer, we’re going to be very wary of helping you create LLCs or other entities. Why? Because we might end up being treated as the “applicant” if we help (or helped) you create the entity. That would mean we have to report, too. Not instead of you, but in addition to you. That same limitation will also apply to your accountant, your financial planner and all manner of other professionals you work with.

And many of our clients would like to reduce their public image. The Corporate Transparency Act might make that harder — or even impossible. Even if you don’t launder money, fund terrorism or even pick up nickels on the sidewalk.

Stay up to date

Subscribe to our Newsletter to get our takes on some of the situations families, seniors, and individuals with disabilities find themselves in. These posts help guide you in the decision making process and point out helpful tips and nuances to take advantage of. Enter your email below to have our entries sent directly to your inbox!

Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.