Corporate Transparency Act: Beneficial Ownership Information Reporting (Updated: January 2025)

Overview of Latest Developments

In the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), the U.S. District Court for the Eastern District of Texas issued an order granting a nationwide preliminary injunction against enforcing the CTA’s BOI reporting requirements.

On Monday, December 23, 2024, the Fifth Circuit Court of Appeals stayed the nationwide preliminary injunction, which meant that the injunction was no longer in effect.

However, on December 26, 2024, a different panel of the Fifth Circuit Court of Appeals issued a new order effectively reinstating the nationwide preliminary injunction. As a result, the beneficial ownership reporting requirements of the CTA are paused yet again and enforcement is suspended pending further proceedings. Accordingly, as of December 26, 2024, reporting companies are NOT currently required to file beneficial ownership information under the CTA until further court order.

FinCEN has issued an alert acknowledging that in light of the December 26, 2024 federal court order, 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, FinCEN noted that reporting companies may continue to voluntarily submit beneficial ownership information reports.

Refer to FinCEN’s Frequently Asked Questions or to the FinCEN’s Reference Materials for detailed information and updated guidance regarding any further deadline changes that may be promulgated.

Next Steps

From our firm’s perspective, preparation remains paramount given the complexities of the current legal and regulatory landscape of the CTA. We strongly encourage any entity deemed a reporting company under the CTA to continue to gather and maintain accurate information about their beneficial owners and company applicants. Given the fluid nature of this situation, it is critical that you closely monitor further developments, including guidance from FinCEN impacting the timing of compliance requirements.

If you have any questions regarding the legal implications of these recent court proceedings or need assistance with a legal determination as to whether an exemption applies to your entity or whether legal relationships constitute beneficial ownership, we strongly encourage you to reach out to legal counsel with expertise in this area to assist your organization.

Corporate Transparency Act: Beneficial Ownership Information Reporting

As of January 1, 2024, the bipartisan Corporate Transparency Act (CTA), enacted in 2021 to curb illicit finance, requires many companies doing business in the United States to report information to the Financial Crimes Enforcement Network (FinCEN) about the individuals who ultimately own or control them – Beneficial Ownership Information (BOI) reporting. FinCEN is a bureau of the U.S. Treasury Department.

As the CTA is not a part of the tax code, the assessment and application of many of the requirements set forth in the regulations, including but not limited to the determination of beneficial ownership interest, necessitates the need for legal guidance and direction. As such, since we are not attorneys, our firm is not able to provide you with any legal determination as to whether an exemption applies to the nature of your entity or whether legal relationships constitute beneficial ownership.

We are providing this information not as legal advice, but simply to acquaint you with the general requirements of the CTA and its reporting deadlines. We strongly recommend that you consult legal counsel with expertise in this area to determine the statute’s application to your particular situation.

Preliminary Injunction Halts BOI Enforcement

As of December 3, 2024, the U.S. District Court for the Eastern District of Texas (Sherman Division) issued a preliminary injunction, “[t]he Court has determined that the CTA and Reporting Rule are likely unconstitutional for purposes of a preliminary injunction. It has not made an affirmative finding that the CTA and Reporting Rule are contrary to law or that they amount to a violation of the Constitution.” The Court went further and ruled that this is a nationwide injunction, applying against enforcement of the CTA and its impending January 1, 2025 filing deadline. We note this is a preliminary injunction, and we urge reporting companies to pay attention for additional updates and proceedings in this and other cases which could modify or change this order.

Voluntary Submission

According to an alert on fincen.gov, “In light of a recent federal court order, 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.”

Determining Your Business Requirements

A company may need to report beneficial ownership information to FinCEN if it is:

  • a corporation, a limited liability company (LLC), or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe; or
  • a foreign company that was registered to do business in any U.S. state or Indian tribe by such a filing.

Twenty-three types of entities are exempt from beneficial ownership information reporting requirements, including publicly traded companies, nonprofits, and certain large operating companies.

FinCEN has provided its Small Entity Compliance Guide which includes a flowchart in chapter 1.2 to determine if your business qualifies for reporting: FinCEN Small Entity Compliance Guide

Original Deadline

Except as impacted by the preliminary injunction, companies that are required to comply (“reporting companies”) must file their initial reports by the following deadlines:

  • Existing companies: Reporting companies created or registered to do business in the United States before January 1, 2024, must file by January 1, 2025.
  • Newly created or registered companies:
    • Reporting companies created or registered to do business in the United States in 2024 have 90 calendar days to file after receiving actual or public notice that their company’s creation or registration is effective.
    • Beginning in 2025, newly created or registered companies will have 30 days.

As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. However, this civil penalty amount is adjusted annually for inflation. As of the time of publication of this FAQ, this amount is $591. A person who willfully violates the BOI reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.

Filing Information

Filing is simple, secure, and free of charge. Beneficial ownership information reporting is not an annual requirement. A report only needs to be submitted once, unless the filer needs to update or correct information.

Follow this link to file BOI reporting: https://boiefiling.fincen.gov/

FinCEN has created a step-by-step guide to completing this form: https://youtu.be/GydCvfbKxPw