Detroit City Wire

The U.S. Court of Appeals for the Fifth Circuit has paused the enforcement of the Corporate Transparency Act (CTA) as of December 26, 2024. This development temporarily halts the requirement for U.S. small business owners to report beneficial ownership information, reversing a prior decision from December 23, 2024, that reinstated these requirements. The CTA remains on hold while under review.

The CTA, which took effect on January 1, 2024, aims to combat illicit financial activities by requiring small businesses across the United States to file beneficial ownership information reports. These reports are also known as corporate transparency reports.

For most eligible small businesses, the deadline to submit these reports is January 13, 2025. Under this act, a reporting company is defined as any privately held company registered to conduct business in the U.S., excluding publicly traded companies.

A beneficial owner is described as an individual owning or controlling at least 25% of an organization or exercising substantial control through roles such as senior officers or decision-makers regarding the company's operations.

Small businesses must report specific details about their companies and beneficial owners. This includes legal names, business addresses, jurisdiction of formation or registration, taxpayer identification numbers, and identity documents like Articles of Incorporation.

Failure to comply with these reporting requirements may result in civil penalties up to $591 per day and potential criminal penalties including up to two years imprisonment and fines up to $10,000.

Federal regulations require businesses to submit beneficial ownership information independently from financial institutions' requirements for similar data aimed at preventing illicit activities within their systems.

To file a corporate transparency report with FinCEN (Financial Crimes Enforcement Network), companies need to determine if they are required to file based on exemptions applicable under CTA guidelines. They must identify beneficial owners and create a secure process for handling personal information before filing online through FinCEN's platform.

For more detailed guidance on corporate transparency reporting requirements and procedures, interested parties can visit fincen.gov/boi.