Due to a recent federal court order, reporting companies are not currently required to file Beneficial Ownership Information (BOI) and are not subject to liability while the order remains in effect.
The Corporate Transparency Act (CTA) is a significant shift in business reporting requirements, mandating certain companies to show beneficial ownership details to the Financial Crimes Enforcement Network (FinCEN). Designed to combat money laundering, the CTA applies to millions of small- and medium-sized businesses.
A recent nationwide injunction temporarily delayed enforcement of the CTA, but the law’s requirements remain. Your business should prepare now to avoid potential penalties when enforcement resumes. This article outlines the CTA’s requirements, the impact of the injunction, and practical steps for compliance.
Key CTA Requirements
The CTA requires “reporting companies” to show information about beneficial owners, including:
- Full legal name, address, and date of birth
- Unique identifying numbers (such as passport or driver’s license)
- Ownership percentage or decision-making control
The law primarily applies to privately held entities such as LLCs and corporations, though exemptions exist (e.g., publicly traded companies and nonprofits). Companies with complex ownership structures — such as startups, family businesses, or private equity-backed firms — may face challenges reporting beneficial owners.
For a full breakdown of CTA requirements, see Beneficial Ownership Reporting Deadline Approaches – Are You Prepared?.
Nationwide Injunction on Enforcement
A recent court decision temporarily halted FinCEN’s ability to enforce the CTA, delaying the original January 1, 2025, deadline. However, this injunction is unlikely to permanently derail the law. Once legal challenges are resolved, enforcement is expected to resume quickly. The Fifth Circuit has sent this issue to a merits panel. Briefings will start in February, with oral arguments scheduled for March 25, 2025. After these oral arguments, the court will review and issue an opinion. This could push off the information reporting deadline to sometime in the second quarter of 2025. Additionally, an application was filed with the Supreme Court by the Justice Department on December 31, 2024. As of this discussion, the Supreme Court has not yet said if or how it will respond.
Key takeaways from the injunction:
- The delay provides businesses with a brief opportunity to prepare, but compliance will likely remain mandatory.
- Businesses should act now to avoid being caught off guard when enforcement resumes.
Risks of Noncompliance
When enforcement resumes, businesses not complying could face:
- Fines: Up to $500 per day, capped at $10,000.
- Criminal penalties: Including imprisonment for willful violations.
The CTA’s enforcement will likely include rigorous audits by FinCEN, particularly for companies with layered or opaque ownership structures. Delaying preparation increases the risk of last-minute errors or penalties.
Steps to Prepare for Compliance
Even with enforcement delayed, your business should take proactive steps to comply:
- Conduct an ownership review: Find all individuals with at least 25% ownership or significant control. Document roles, ownership percentages, and needed personal details.
- Gather documentation: Collect valid identification (such as driver’s licenses or passports) for all beneficial owners. Verify that all information is current.
- Assess your filing obligations: Decide whether your company qualifies as a “reporting company” or is exempt. Consult legal or tax advisors if needed.
- Build internal processes: Establish systems for ongoing compliance, including reporting ownership changes to FinCEN.
Industry-Specific Challenges
Some industries face unique compliance challenges:
- Cannabis: Ownership layers required by state licensing can complicate beneficial ownership reporting.
- Technology/startups: Venture capital-backed companies must track frequent changes in ownership.
- Manufacturing and life sciences: Family-owned entities often overlook reporting requirements due to assumptions of exemption.
Understanding how the CTA affects your industry can help reduce risks.
What to Expect Post-Injunction
Businesses should prepare for the following once the injunction is lifted:
- Renewed enforcement: FinCEN will likely resume enforcement with little or no grace period.
- Increased audits: The delay may allow FinCEN to strengthen oversight and audit mechanisms.
- Potential changes: Regulatory adjustments are possible but should not be relied on to end compliance obligations.
Acting now minimizes risks and avoids costly penalties when enforcement resumes.
Final Thoughts
The Corporate Transparency Act is a major regulatory shift that requires proactive planning. While the nationwide injunction delays enforcement, your business should use this time to review ownership structures, collect documentation, and set up compliance processes. Acting early reduces risk and supports readiness when enforcement resumes.
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