Despite an effective date that’s less than 90 days away, a significant portion of businesses subject to new reporting rules under the Corporate Transparency Act (CTA) are either unaware of the reporting obligations they face or are unsure about how they will comply, according to a new Wolters Kluwer survey. In fact, awareness among affected companies is so low that nearly three-quarters of respondents whose firm will be expected to report beneficial ownership information under the CTA became aware of the obligation only by being asked for the survey.
FinCEN, which will receive reports and maintain the ownership database, has estimated that nearly 33 million companies will be affected when the requirements begin at the start of next year, with another 5 million new businesses forming and being registered every year after that. The beneficial ownership reporting rule, part of the CTA and issued by Treasury’s FinCEN in September 2022, will require companies to collect, document and monitor previously unreported data on a company’s primary owners.
Despite the new requirements, Wolters Kluwer’s survey of nearly 1,000 corporate entities, showed that while just over half of respondents (51%) were from companies covered by the CTA’s requirements, 74% of those covered were previously unaware the CTA applied to them. Just over 40% were aware of the CTA’s obligations but unsure about whether it applied to their businesses.
“Lack of understanding regarding the applicability of beneficial ownership reporting is significant — 41% are ‘unsure’ among companies we surveyed — as is the lack of awareness about the CTA in general,” said George May, vice president and segment leader for small business for CT Corp., a Wolters Kluwer business.
Among respondents who believe CTA applies to their organization, only 27% anticipate doing their own reporting, with 48% anticipating using third parties and another 25% are unsure as to their plans.
The survey was conducted from June 15 to July 5 via Qualtrics, with Wolters Kluwer identified as the study sponsor.