A federal court in Texas has issued a nationwide injunction that, at least for now, blocks enforcement of the Corporate Transparency Act (CTA) and its Beneficial Ownership Information (BOI) Reporting Rule.
If you own any type of corporate entity, this is critically important. This rule, which has not been widely publicized, requires owners of corporate entities registered with the state to file a BOIR report by the end of 2024.
Under the recently enacted law, failure to meet the deadline carries harsh penalties.
"Those who fail to file by this deadline — or fail to update this information if needed — could face up to two years imprisonment and fines up to $10,000, in addition to civil penalties of up to $591 per day," the U.S. Chamber of Commerce said in a warning on its website.
What?!?
If you haven’t yet heard of this requirement, it’s not surprising. The law took effect this year. The law requires companies – even those owned by a single individual doing a side hustle – to file a report to the Financial Crimes Enforcement Network (FinCEN).
The purpose of the law is to fight money laundering, terrorist financing, corruption, and tax fraud by making it clear to the government who, in fact, owns the entity.
Most small and medium-sized businesses must comply with the law, including C corporations, S corporations and limited liability companies (LLCs).
The report must include the names, addresses, dates of birth, and identification document numbers of the owners who benefit from that ownership.
The Texas court’s injunction may provide some temporary relief, giving business owners more time to comply. The court found the law itself may be unconstitutional.
However, the government is expected to appeal. Business owners who don’t want to take any chances may want to file the report before the end of the year.
To file a report, go to the FinCEN website and follow the instructions. Owners will need to upload copies of their drivers license.