On October 22, 2019, the U.S. House of Representatives passed the Corporate Transparency Bill of 2019 (“the Bill”), an amendment to the Bank Secrecy Act. If passed by the Senate and signed by the President, the Bill would effectively require investment companies and small business entities to disclose information on the entity’s economic owners at the time of formation and in annual disclosures. While it is not knowable at this time whether the Bill will pass the Senate (and in what form), there are indications that the Trump administration supports the legislation in principle.


Under current law, the information collected at formation of a corporation or limited liability company (LLC) is dependent on the state in which the entity is formed. Many states, such as Delaware (the most commonly used state of formation), requires little information on the individuals that are the true economic owners, as opposed to persons that may hold bare legal title to shares for the benefit of undisclosed persons. Additionally, neither the states nor the Federal government generally require annual disclosures of a U.S. entity’s owners (other than certain disclosures on income tax returns). As a result of current law, the proponents of the legislation believe that a lack of information gathering has perpetuated an environment whereby persons can hide investments for nefarious purposes (such as terrorism, money laundering, and tax evasion).


Discover more: Beneficial Owners Beware: House Passes Bill to Curb Corporate Secrecy

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