Court Temporarily Blocks Law Requiring Beneficial Ownership Information Reporting

Latest Updates on the Corporate Transparency Act

A federal district court in Texas issued an injunction on Dec. 3, 2024, that temporarily blocks enforcement of the Corporate Transparency Act and its reporting rule. The U.S. Department of Justice filed an appeal to stay the preliminary injunction, but the court denied the motion on Dec. 17, 2024. 

So, the injunction remains in place, which means that reporting companies as defined by the law do not have Beneficial Ownership Information (BOI) reporting requirements, including a Jan. 1, 2025, deadline for all businesses formed or registered prior to Jan. 1, 2024.

The final outcome of this case remains uncertain, so individuals subject to BOI reporting should stay up to date while the injunction is in effect because legal proceedings could reverse the decision and reinstate compliance requirements. 

Original article for informational purposes only

Many businesses identified as reporting companies — primarily LLCs, S corporations, and C corporations — will have additional reporting requirements starting in 2024 under the Corporate Transparency Act (CTA). This mandate from the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) is intended to help prevent and combat money laundering activities by requiring some businesses to report their Beneficial Ownership Information (BOI).

Who Qualifies as a Beneficial Owner?

There are a few factors used in determining a beneficial owner, including an individual who, indirectly or directly:

• Exercises substantial control over a reporting company
• Owns or controls 25% or more of a reporting company’s ownership interests

There are two types of reporting companies; a Domestic reporting company (DRC) and a Foreign reporting company (FRC). Both involve corporations and limited liability companies. Both must file a document with a secretary of state or similar office. The difference is a DRC is created through the filing of its documents, while an FRC is formed under the law of a foreign company and has to file documents to register to conduct business in the U.S.

There are, however, exemptions for certain entities. For example, large operating companies, public utilities, certain financial institutions, and insurance companies might be exempt if all criteria are met. In all, there are 23 exemptions, so your business should seek legal counsel to understand if you qualify as exempt.

Note: Although not specified in FinCEN’s rule, sole proprietorships and general partnerships might also be exempt.

How Does My Business File a BOI Report?

The electronic filing system is available and the form to report BOI can be accessed online.

What Is the Deadline for BOI Reporting?

As of Jan. 1, 2024, newly formed entities have 90 days from the date of receiving notice that the company’s creation or registration has become effective to file their BOI report. As of Jan. 1, 2025, all businesses required to report will have 30 days from establishment or registration to file.

Businesses in existence prior to Jan. 1, 2024, that meet the criteria to report BOI must file by Jan. 1, 2025.

What Information Is Required on a BOI Report?

A reporting company must report:

• Legal name
• Any trade names, DBAs, or trading as names
• Current street address of its principal place of business
• Its jurisdiction of formation or registration
• Taxpayer ID#

Beneficial owners must report:

• Individual’s name
• Date of birth
• Residential address
• An ID# from an acceptable ID document (passport, U.S. driver’s license, and name of issuing state or jurisdiction of the ID document
• Must supply an image of the ID document and it cannot be expired

For additional information, check out the BOI webpage.

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What Are the Penalties for Non-Compliance?

The penalties are steep. Willful violations could result in civil penalties and/or criminal penalties. FinCEN published inflation adjustments in January 2024 for civil monetary penalties, increasing the potential fine to $591 per day (effective Jan. 25, 2024) from its original $500. The cap remains at $10,000. Criminal penalties could include imprisonment of up to two years.