Corporate Transparency Act
Resource Page
Litigation Alerts 🔔
In light of a recent federal court order, FinCEN has taken the position that reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.
Although a nationwide injunction against enforcement of the CTA is still in effect, the Department of Justice, on behalf of FinCEN, filed an Emergency Motion for Stay Pending Appeal with the United States Supreme Court on December 31, 2024. The Supreme Court set a deadline of 4:00 PM Eastern on January 10, 2025 for the plaintiffs in the case to file a response to the request by FinCEN to reinstate the emergency stay originally issued by the 5th Circuit Court of Appeals. The Supreme Court's decision on the emergency stay may be released shortly after the response is due. If the Supreme Court grants the government's request, assume that FinCEN will continue its push to require compliance with the CTA and that Beneficial Owner Reports could be due as early as Monday, January 13, 2025.
The takeaway - some filings may be due as early as January 13, 2025, FinCEN may grant a brief extension, or the injunction will remain in place at least until the 5th Circuit makes a decision in March. Unless you feel strongly or have other reasons not to file now, most small business may want to just file their BOIR voluntarily and should consult with legal counsel if they have any questions.
What is the CTA?
The Corporate Transparency Act (known as the CTA) is a new federal law that went into effect on January 1, 2024. This new law requires most legal entitles to file a Beneficial Ownership Information Report (BOIR) with the Financial Crimes Enforcement Network (FinCEN). Most entities, even small business owners, owners of investment LLCs, nonprofits, and certain family partnerships, will need to file this report before the end of 2024.
It is estimated that more than 32 million small businesses will need to file a BOIR in 2024.
The CTA may require that you file a BOIR on behalf of a company if you:
are a business owner;
have a beneficial ownership in an entity of 25% or more;
have substantial control over an entity; or
are associated with trusts that own or manage other businesses entities
“Substantial control” over an entity is shown by:
An individual being a senior officer in the entity;
An individual having the ability to appoint senior officers in the entity; or
An individual having control over “important decision-making” which includes decisions regarding (i) the nature of the business of the entity, (ii) the finances of the entity, or (iii) the entity’s structure.
Both “beneficial ownership” and “substantial control” include direct and indirect ownership or control.
For many companies, filing the BOIR could be a relatively routine matter similar to filing an annual statement of information. However, the filing requirements can be a bit confusing for companies that have multiple owners, owners with spouses having a community property interest, or individuals who may need to report under the substantial control requirement. The consequences for doing so incorrectly are significant. And, in some cases, the analysis of who is required to file can be very complex. Therefore, it is recommended that all companies consult with qualified legal counsel to discuss their filing requirements.
Penalties
The penalties for failing to report or misreporting can be severe. Anyone willfully violating the reporting requirements could be liable for penalties of up to $500 for each day of continuing violation and criminal penalties include up to two years imprisonment and up to a $10,000 fine.
Recent Legal Challenges
On March 1, 2024, a lower Alabama federal court held that the CTA is unconstitutional and enjoined enforcement of the CTA against the plaintiff and those were belonged to the National Small Business Association at the time the ruling was made.
This ruling DOES NOT affect the legal obligation of other entities to timely file their BOIR at this time. We are carefully tracking the development of this case and similar cases across the county and will continue to provide updates when available.
Scam Alert
FinCEN has been notified of recent fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the CTA.
The fraudulent correspondence may be titled “Important Compliance Notice” and asks the recipient to click on a URL or to scan a QR code. Those emails or letters are fraudulent. FinCEN does not send unsolicited requests.
Do not respond to these fraudulent messages, click on any links, or scan any QR codes within them.
Have More Questions?
If you have questions about if or how the CTA applies to your company, you can use the link below to reach out to our team and book a paid 30-minute consultation. During this consultation, we can discuss questions specific to your company and the individual information that may be required.
If you are an existing client, you can log into your secure client portal to elect whether to have us assist you with filing your BOIR.
Disclaimer: The information provided on this resource page is for educational purposes only, and is not intended to constitute legal advice. Specifically, this resource page, and all materials and content on this page is intended to provide a general overview of the Corporate Transparency Act. Certain aspects of the CTA are extremely complicated, and this resource page and the information contained in this page are not a complete description or analysis about the way in which the CTA applies to any particular organization or person. The legal analysis under the CTA, as with any legal issue, is highly fact-specific.
If you have specific legal questions, you are encouraged to engage a qualified attorney. You should not act or refrain from acting on the basis of information in this resource page without first seeking legal advice from qualified legal counsel.