The Corporate Transparency Act (CTA) requires certain businesses to disclose beneficial ownership information (BOI). Although the CTA officially took effect in January 2024, a recent federal court injunction has temporarily paused enforcement of its reporting requirements. This article explains the current state of the CTA, what the injunction means, and how business owners in New York City should prepare. New York City business law attorneys at The Village Law Firm are here to help you understand the law and the CTA’s requirements, gather necessary details, and stay informed about future updates.
What Is the Corporate Transparency Act?
The CTA is a federal law aimed at combating financial crimes like money laundering and tax evasion. By requiring certain businesses to disclose who owns or controls significant stakes, the law seeks to prevent misuse of shell companies for illegal activities.
Under the CTA, businesses must file a BOI report with the Financial Crimes Enforcement Network (FinCEN). This report typically includes:
- Names of individuals owning or controlling at least 25% of the business.
- Information about those with significant decision-making power.
Current Legal Enforcement of BOI Reporting Requirements
On December 26, 2024, a panel of the U.S. Court of Appeals for the Fifth Circuit reinstated a nationwide injunction that blocks the enforcement of the CTA and its implementing regulations. This ruling followed a series of court decisions and appeals, including a temporary lifting of the injunction on December 23, 2024, which was promptly vacated three days later.
Key Points of the Injunction:
- No mandatory reporting: Businesses are not currently required to file BOI reports with FinCEN.
- No liability for non-compliance: While the injunction remains in effect, companies will not face penalties for failing to submit BOI reports.
- Voluntary filings permitted: Businesses that wish to file BOI reports proactively may do so through the FinCEN BOI E-Filing System.
The Department of Justice, on behalf of the Department of Treasury, is actively appealing the injunction, which could lead to a reversal in the future.
Which Businesses Are Impacted by the CTA?
The CTA applies to many small and closely held businesses, but some are exempt, including:
- Large companies with over 20 employees and more than $5 million in annual revenue.
- Regulated entities like banks and publicly traded companies.
- Nonprofits and certain trusts.
For small businesses in New York City—especially LLCs, partnerships, and closely held corporations—compliance may be necessary if the injunction is lifted.
What Information Is Required for BOI Reporting?
If and when the CTA’s reporting requirements are reinstated, New York City businesses will need to provide detailed information about the company and its beneficial owners, including:
- For the business:
- Full legal name and trade names.
- Principal place of business in the U.S.
- Tax identification number.
- For each beneficial owner:
- Full legal name, date of birth, and residential street address.
- Identification number from a government-issued ID (e.g., driver’s license or passport).
Newly formed businesses may also need to report information about “company applicants”—individuals who played a role in registering the company. For detailed guidance about how to BOI reporting, watch our video: How to Comply with the Corporate Transparency Act in 10 Minutes or Less.
What Are the Penalties for Non-Compliance?
Although reporting is not currently required due to the injunction, it’s important to understand the potential consequences of failing to comply if the CTA’s enforcement is reinstated. Penalties may include:
- Fines of up to $10,000.
- Imprisonment for up to two years.
- Additional fines for failing to update inaccurate information within 30 days of a change.
How New York City Business Owners Can Prepare While the Injunction Is in Effect
Even though BOI reporting is paused, it’s wise to stay prepared. Here are a few steps to ensure you’re ready if reporting requirements resume:
1. Determine Your Business’s Status
Assess whether your company falls under the CTA’s requirements. Most small businesses in New York City, especially LLCs and closely held corporations, are likely subject to the law.
2. Organize Your Information
Gather the necessary details about your business and its beneficial owners now, so you’re ready if deadlines resume.
3. Stay Informed
Monitor updates from FinCEN and legal announcements about the injunction. Reporting could be reinstated quickly.
4. Work with a New York City Business Law Attorney
Consulting with a trusted business law attorney ensures your business is well-prepared and positioned for compliance if enforcement resumes.
Getting Help with Your BOI Report
The Village Law Firm here to help New York City business owners navigate this evolving legal landscape. Whether you choose to file voluntarily or wait for further guidance, we can assist you in ensuring your business is ready to comply if and when the CTA is fully enforced. Book a call with our business planning team to take proactive steps to protect your business.
