Corporate Transparency Act: Understanding the Legal Rollercoaster

ARTICLE | January 16, 2025

Introduction

The Corporate Transparency Act (CTA) has been a hot topic among businesses over the last few years, with rapidly changing requirements that have left many owners confused and on edge. After a series of back-and-forth court rulings, the question of whether companies must file Beneficial Ownership Information (BOI) reports has become increasingly complicated. In this article, we’ll explore the background of the CTA, the ins and outs of BOI reporting obligations, the critical deadlines originally imposed, and why the courts have placed them in a state of flux. We’ll also discuss how these changes impact small businesses and how you can prepare, even as the enforcement landscape feels like it’s on a rollercoaster track.

Background on the Corporate Transparency Act (CTA)

The Corporate Transparency Act was enacted to combat illicit financial activities such as money laundering and fraud. By requiring businesses to disclose their “beneficial owners”—the individuals who ultimately own or control the entities—the CTA aims to shine a light on the true stakeholders behind a company. While legislation around beneficial ownership isn’t new on a global scale, the CTA marks a significant shift in the United States. The government’s goal is to ensure greater transparency across all sectors, from major corporations to smaller, closely held ventures.

From the start, the CTA was intended to be comprehensive, capturing information not only from large public companies but also from smaller entities, including limited liability companies (LLCs), partnerships, and other similar structures. The driving rationale is that clear insight into business ownership provides a more effective shield against criminal or fraudulent activities, which often hide behind opaque corporate structures.

Understanding Beneficial Ownership Information (BOI) Requirements

Under the CTA, when BOI regulations are enforced, certain businesses must disclose the identity of any individual who owns or controls at least 25% of the company or has substantial decision-making authority. Typically, “beneficial owners” include founders, co-owners, major shareholders, and anyone holding equivalent decision-making power (such as top executives).

The BOI report itself consists of basic information regarding both the company and its stakeholders. For companies, this might include the entity’s legal name, address, and Employer Identification Number (EIN). For each beneficial owner, the required details often include the individual’s full name, date of birth, residential address, and a government-issued ID number (e.g., from a driver’s license or passport). Accuracy here is critical, as filing incorrect or incomplete information can invite penalties, even in a best-intentioned scenario.

While the CTA was originally structured with firm deadlines, many businesses discovered that the specifics of these requirements were no straightforward affair. The law initially set a staggered reporting framework based on an entity’s formation date. Yet recently, unpredictable court decisions have caused widespread confusion and shifted the timeline for compliance—raising more questions than answers.

Key Dates and Timeline for Compliance

The Corporate Transparency Act officially took effect on January 1, 2024. Under its original timeline, businesses formed before that date would have had until January 1, 2025 to file their initial reports. Companies created in 2024 had a 90-day window to comply upon formation or registration, and entities formed on or after January 1, 2025 would have just 30 days to file.

After the CTA launched, several federal court decisions played out like a volley in a tennis match, with nationwide enforcement suspended, reinstated, and then suspended again. At one point, the official deadline for older companies to file shifted from January 1, 2025 to January 13, 2025, only to be revoked a few days later. This whiplash of rulings has left a great many businesses uncertain about how to plan for compliance.

Currently, as a result of an injunction, many companies are not required to file BOI reports. According to recent announcements, these businesses will not face penalties if they fail to file during this period of suspension. However, the Financial Crimes Enforcement Network (FinCEN) continues to encourage voluntary submission of the relevant information for those who wish to act proactively.

The Legal Rollercoaster: Court Rulings and Challenges

Ever since the CTA was enacted, multiple lawsuits have questioned the constitutionality of imposing BOI reporting on so many entities. Different federal courts have delivered different outcomes, resulting in official CTA deadlines that at times have been in effect for a few days, only to be halted again.

Some plaintiffs argue that the law is overly burdensome and an invasion of privacy, particularly for smaller businesses with limited administrative resources. Other courts have found the CTA both reasonable and necessary to curb illegal financial activities. As these parallel legal cases advance through appeals, businesses have found themselves pivoting from one compliance date to another with little advance notice.

For now, the authority to enforce the CTA’s deadlines has been paused by an injunction, pending further court reviews. FinCEN has stated that it believes strongly in the constitutionality of the CTA and will continue to defend the law. But until the courts make a final determination, the compliance timeline remains on hold for most companies.

Impact on Small Businesses

An estimated 30 million (or more) small businesses stand to be affected by the CTA. For many of these smaller entities, the rollercoaster of legal decisions has generated unnecessary stress and uncertainty. Owners who scrambled to gather the required documentation to meet one compliance date discovered shortly after that the date had changed. Others are still on the fence about whether to file voluntarily, waiting for clarity.

This disruption has caught the attention of various small business advocacy groups. Critics argue that these shifting deadlines make it impractical for owners to plan how to gather, file, and maintain comprehensive beneficial ownership records—especially given the complexity of data required. Supporters of the law, on the other hand, maintain that transparent reporting is essential to ward off fraudulent shell companies.

“Small businesses should stay vigilant during times of uncertainty. Even if CTA deadlines keep shifting, keeping organized records of ownership information now can lead to a smoother process down the road,” advises Jamie Miller, a Certified Public Accountant and Partner at MBN & Company.

Potential Future Scenarios

Because the latest court ruling is an interim decision, there continues to be a possibility that the CTA’s reporting requirements may be reinstated in full. In other words, a future ruling could ultimately uphold the law’s constitutionality and set yet another compliance date, or the suspended deadlines could be permanently struck down.

Additionally, there is a chance that changes in congressional leadership or targeted legislative efforts could amend or repeal parts of the CTA, potentially creating a narrower set of requirements or prolonging the deadlines again. For now, businesses would be wise to stay agile and monitor legal developments so they are ready to file quickly if the circumstances demand it.

How MBN & Company Can Help

Even amid ongoing legal uncertainties, the fundamental premise of gathering accurate BOI remains important for many businesses. As each new court decision emerges, you will want to ensure your company’s information can be easily documented and reported if required.

MBN & Company can provide support through our Client Accounting Services (CAS). We help you manage the day-to-day accounting tasks that can become crucial when preparing any type of regulatory reporting. Our services include real-time accounting, recordings of daily transactions, cloud integrations, and specialized KPI dashboards that help maintain clarity on ownership data. If you ever need to comply with BOI requirements, having your records in order will save you substantial time and reduce stress.

Our CFO and Advisory Services go further, offering strategic insights to align compliance needs with your overall business objectives. We stay up to date on the CTA’s legal developments, so you don’t have to navigate this shifting landscape on your own. Whether the courts revise the compliance window yet again or Congress modifies the CTA, our team is prepared to guide you through any changes swiftly and efficiently.

Conclusion

The Corporate Transparency Act was intended to promote financial transparency and discourage fraudulent business structures. Instead, the changing court rulings have led to a sometimes baffling maze of suspended and reinstated deadlines, briefly creating a nationwide scramble for compliance and then relaxing the requirements again.

Regardless of ongoing legal challenges, all businesses—and particularly smaller ones—should treat beneficial ownership oversight as a best practice. By staying informed, maintaining accurate records, and developing a solid plan for compliance, you will be well-poised to respond if the courts reinstate or modify these rules. FinCEN continues to back the CTA and encourages voluntary filing for those wanting to act now. As the legal rollercoaster continues, consider seeking professional guidance to ensure that whenever the final whistle blows, your business is already on stable footing.

Jamie Miller – Partner, CPA
Email: jmiller@marketingbynumbers.io
Jamie Miller has over 15 years of public accounting experience, specializing in tax services for construction, real estate, and not-for-profits. He guides businesses from formation and growth to retirement and succession planning, helping them maintain proper tax and compliance strategies every step of the way.