Few Companies Subject to New CTA Reporting Requirements Are Aware of Them, Reveals Wolters Kluwer Survey

A new survey by Wolters Kluwer has exposed a startling lack of awareness among companies subject to the Corporate Transparency Act (CTA), which is set to take effect in less than 90 days. The CTA introduces "beneficial ownership" rules that mandate companies to report vital information about their ownership structure. Failure to comply with these new regulations poses substantial compliance risks, including hefty fines and the potential for legal repercussions.

The U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) anticipates that the CTA will impact approximately 32.6 million reporting companies in 2024 alone, with an additional five million new reporting companies forming and registering each year.

The survey's results, based on responses from 669 U.S.-based companies, as well as 328 law firms and accounting firms, highlight a concerning lack of understanding about the CTA and its implications. Among the survey participants, 74% of companies subject to the CTA rule only became aware of these obligations through the survey itself. Even among respondents aware of the CTA, 41% were uncertain about whether the beneficial ownership rule would apply to their company, despite their reporting status and revenue size.

Of those companies that believed the CTA applies to their organization, only 27% anticipate handling their reporting internally, with 48% planning to use third-party services, and 25% unsure about their approach.

Ross Aronowitz, Vice President, CT Corporation Law Firm segment, Wolters Kluwer, noted, "Small businesses will look to their CPA firms and law firms for guidance on the CTA. Yet among those advisors, awareness of the Act is mixed, and there is a high degree of uncertainty regarding the role they want to play in supporting their clients."

The survey was conducted between June 15 and July 5 through Qualtrics, with Wolters Kluwer sponsoring the study.

The CTA's beneficial ownership reporting rule, issued by FinCEN in September 2022, mandates companies to collect, document, and monitor previously unreported data on a company's primary owners. Every person who owns or manages a limited liability company (LLC) must be aware of these new reporting requirements. They must determine if their company falls under BOI reporting and, if so, prepare for compliance.

The countdown to the CTA's effective date continues, with companies and advisory firms facing a growing urgency to understand and prepare for these groundbreaking regulatory changes. As the survey reveals, lack of awareness can have serious consequences, making it crucial for businesses to act swiftly in addressing their compliance obligations under the CTA.