At 1:30 pm Eastern Time on December 23, 2024, the United States Court of Appeals for the Fifth Circuit reinstated the immediate enforceability of the Corporate Transparency Act (CTA) Compliance. This critical ruling, issued in Texas Top Cop Shop, Inc. v. Garland, puts the compliance obligations for reporting companies back in effect, with a stayed deadline.
This post will help businesses understand what the CTA means, how the Fifth Circuit's decision impacts compliance timelines, and how to prepare to meet the obligations under this law.
"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." -FinCEN, US Treasury. December 27, 2024.
What Is the Corporate Transparency Act?
The CTA is designed to combat illicit financial activity by requiring most corporations, LLCs, and similar entities to disclose their beneficial ownership information to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).
Entities covered by the CTA must report:
Beneficial Owners: Individuals with significant control or substantial ownership of the company.
Company Applicants: Individuals responsible for forming the entity.
The information collected will be stored in a non-public database to aid law enforcement and protect against misuse.
Recent Developments: Fifth Circuit Ruling
On December 3, 2024, a lower court issued a nationwide injunction against the CTA, effectively halting its enforcement. However, the Fifth Circuit’s December 23, 2024, decision stayed that injunction, reviving the CTA's enforceability. This means:
Compliance Deadlines Are Back in Effect: Reporting companies in existence as of January 1, 2024, may voluntarily file their reports at any time currently.
Uncertainty Remains: The challengers may seek further review, and ongoing litigation in other courts could affect the CTA's implementation.
At present, FinCEN has not issued updated guidance following the Fifth Circuit’s decision, leaving every US-based small businesses in a precarious position.
What Should Businesses Do Now for Compliance?
US-based small businesses must act quickly to ensure compliance. Here’s what you can do:
Understand Your Obligations: Determine whether your entity is required to report under the CTA. Non-exempt entities include most corporations and LLCs, except for publicly traded companies and certain regulated entities.
Gather Beneficial Ownership Information: Identify individuals who meet the definition of beneficial owners and collect their required information (e.g., names, addresses, and identifying documents).
Monitor Legal Updates: Keep an eye on developments, as ongoing litigation or new FinCEN guidance could alter the compliance landscape.
Consult a Legal Professional: The CTA's complexities require careful navigation. A lawyer can ensure your reporting is accurate and timely.
Why Work With Us?
Pace Johnson Law Group specializes in helping businesses comply with the Corporate Transparency Act. With the recent federal court order, the deadline has been suspended. However, we offer tailored legal solutions to simplify your voluntary compliance process. Our services include:
Determining if your company is subject to the CTA.
Assisting with beneficial ownership information collection.
Filing required reports with FinCEN.
Conclusion
The Fifth Circuit’s ruling has reactivated the Corporate Transparency Act, and the clock is ticking for compliance. Don’t let your business fall behind—take action now to ensure you meet your obligations under the CTA.
Contact us today to schedule a consultation with our legal team that can assist to businesses nationwide. Together, we can make your compliance process seamless and stress-free.
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