In a March 1, 2024 ruling, the U.S. District Court for the District of Alabama deemed the Corporate Transparency Act (CTA) unconstitutional. In the wake of this decision, small business owners are asking how the ruling will affect their businesses and how they should move forward in alignment with the ruling. On today’s blog post, we take some time to walk you through the basics of the Court’s decision and discuss its possible implications, both today and further down the road. As always, if you have questions about how this post might or might not apply to you, contact an experienced Boulder estate planning attorney that can tell you more about the District Court’s ruling in this case and its possible implications moving forward.
What is the Corporate Transparency Act and Who Must Comply with the Act?
The CTA requires certain businesses to submit “beneficial ownership information” (BOI) to the U.S. Department of Treasury’s Financial Crimes Enforcement Network. The Act’s purpose is to ensure that businesses are above board, in that they are not engaging in illicit activities such as tax evasion and money laundering. Importantly, only certain kinds of businesses most comply with the CTA – these businesses include LLCs, corporations, and some other entities formed through filing with a Secretary of State. To check if your business is required to report under the CTA, you can either speak with a trusted attorney or look closely at the CTA’s requirements on the Department of Treasury’s website.
The CTA lays out important details such as reporting deadlines, reporting requirements, and penalties for non-compliance. In order to comply with the Act, businesses can face average costs of $8,000 within the first year of reporting, which can be a huge lift for smaller businesses. When businesses send in information according to the Act’s requirements, the information is not made public; instead, the government uses the information to monitor possible illicit business activities.