In connection with our ongoing efforts to keep our clients and partners informed of relevant and impactful developments in the legal landscape, this update on the status of the Corporate Transparency Act (“CTA”) addresses potential implications for you and your business.
Earlier this year, we authored a client alert following the National Small Business Association’s successful legal challenge to the constitutionality of the CTA. The decision shielded the National Small Business Association, along with its then-existing members, from the various reporting requirements of the CTA. Critically, however, the Court’s ruling did not extend beyond the National Small Business Association and no subsequent actions have broadened the scope of the ruling beyond the plaintiffs in that case. Consequently, the CTA remains fully enforceable for the vast majority of impacted entities and individuals. Accordingly, we are advising clients to continue monitoring the reporting deadlines to ensure compliance with statutory and regulatory requirements.
As a general rule, reporting companies formed prior to January 1, 2024, must file initial Beneficial Ownership Information (BOI) reports by the end of the year, while companies formed in 2024 must file within 90 days of formation.
As we predicted in our client alert, litigation against the CTA continues – both as an appeal by the government in the National Small Business Association case, as well as a number of other actions in various courts across the country seeking a broader application of the initial ruling to exempt additional entities from the reporting requirements. Due to these ongoing challenges, it is possible that there will be further developments regarding the applicability of the CTA before the end-of-year deadline for many previously existing reporting companies. Given the rapidly approaching deadlines and the potential for significant administrative work necessary to comply with CTA requirements, most companies will need to begin taking steps well before any final decisions are announced. At the very least, we recommend that entities act now to verify that they will indeed need to report, and begin to identify which individuals would be considered “Beneficial Owners” under the broad definition utilized in the CTA. For more information about determining whether an entity is required to report and who is a beneficial owner, see our CTA guide here. These preliminary steps will help to streamline the collection of information necessary to comply with the specified timeframes.
We will continue to monitor developments regarding the CTA and provide additional information as necessary. For more information about how the CTA may impact you, your business, or your clients, please contact the Davis, Agnor, Rapaport & Skalny attorney with whom you typically work, or one in our Business Planning & Transactions Practice Group.
