As businesses throughout the United States prepare for the upcoming compliance requirements under the Corporate Transparency Act (CTA), important updates have emerged regarding the Beneficial Ownership Information (BOI) reporting deadline.
This article explains the recent court developments, the impact of a preliminary injunction, and what businesses need to know to stay compliant.
What is BOI Reporting?
Under the CTA, which went into effect January 1, 2024, most companies doing business in the U.S. are required to disclose information about the individuals who own or control them, known as Beneficial Ownership Information. The goal of this reporting is to enhance transparency and help combat money laundering, terrorism financing, and other illicit activities.
The information submitted to the Financial Crimes Enforcement Network (FinCEN) will include details about the beneficial owners of companies, such as their names, addresses, dates of birth, and unique identifying numbers (e.g., passport or driver’s license). Companies that fall under the CTA’s reporting requirement must submit this data to FinCEN.
Preliminary Injunction Temporarily Delays BOI Reporting
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction halting the enforcement of the BOI reporting requirement. The Court found there is a likelihood the CTA and its reporting rule may be unconstitutional, though it has not yet issued a final decision. This injunction temporarily blocks the enforcement of the CTA, which would have required businesses to submit reports by January 1, 2025.
According to an alert on fincen.org, “In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information and are not subject to liability if they fail to do so while the order remains in force.”
However, businesses may still choose to voluntarily submit their BOI information to FinCEN.
What Does the Preliminary Injunction Mean for Your Business?
While the preliminary injunction gives businesses some breathing room, it is important to remember this is only a temporary measure. Companies still need to monitor developments and be prepared to comply when the injunction is lifted or if there are further legal updates.
We recommend staying informed and consulting with legal counsel to determine how this situation may impact your specific business.
Do You Need to Report Beneficial Ownership Information?
Not all businesses are required to submit BOI reports. To determine whether your business is subject to this requirement, consider the following criteria:
- Domestic entities: If your company is a corporation, limited liability company (LLC), or similar entity formed or registered in the United States, you may be required to report.
- Foreign entities: Foreign companies registered to do business in the U.S. are also subject to the reporting requirement.
However, certain businesses are exempt from reporting. For example, publicly traded companies, large operating companies, and some regulated financial institutions do not need to submit BOI reports. FinCEN’s Small Entity Compliance Guide includes a flowchart to help you determine if your company is required to report.
Original Deadline for BOI Reporting
Except as impacted by the preliminary injunction, companies required to comply must file their initial reports by the following deadlines:
- Existing companies: Entities that were created or registered in the U.S. before January 1, 2024, must file by January 1, 2025.
- Newly created or registered companies: Businesses formed or registered in 2024 will have 90 days from the date their formation or registration is effective to file the report.
- Beginning in 2025, newly created or registered companies will have 30 days.
Potential Penalties for Noncompliance
It is crucial to submit accurate and timely reports. Companies that fail to comply with the reporting requirements may face civil and criminal penalties. Civil fines can be as high as $591 per day (adjusted for inflation), and willfully failing to file or submit false information could result in criminal penalties, including up to two years in prison and a $10,000 fine.
How to Submit BOI Information
Filing your BOI report is a straightforward process and is free of charge. The report is only required once unless there are changes to the information you’ve previously provided. Businesses can file the report directly with FinCEN through their online portal.
- To file your report, visit the official FinCEN filing site: https://boiefiling.fincen.gov/
- FinCEN has created a step-by-step guide to help you complete the filing process: Watch the tutorial here.
Next Steps for Your Business
Given the uncertainty around the preliminary injunction, we recommend the following steps to ensure that your business is prepared:
- Review your entity’s structure: Understand whether your business qualifies for the BOI reporting requirement.
- Consult with legal counsel: Since the CTA is not part of the tax code, legal guidance is essential to determine whether exemptions apply and to help interpret the law as it applies to your business.
- Monitor legal developments: Stay informed about any changes in the legal landscape regarding the BOI reporting requirement.
- Prepare your beneficial ownership information: If your business is required to report, ensure that you have accurate and up-to-date information about the individuals who own or control your company.
The Corporate Transparency Act represents a significant shift in how businesses must report ownership information, and while the preliminary injunction has temporarily delayed the enforcement of these rules, it’s important for businesses to stay proactive.
We will continue to monitor this situation and provide updates as necessary. In the meantime, we encourage all our clients to consult with legal professionals to assess their obligations under the CTA.
Our firm is here to support you throughout this process. If you have questions about the BOI reporting requirement, please contact us to schedule a consultation.