Corporate Transparency Act Compliance: Key Actions for Beneficial Ownership Reporting

Note: This blog provides important information on the Corporate Transparency Act (CTA) compliance; however, a more up-to-date analysis is available. For the latest updates and insights, please refer to our most recent blog.

On February 18, 2025, the U.S. District Court for the Eastern District of Texas ruled that the Corporate Transparency Act (CTA) remains in effect. This ruling reinstates the reporting requirements for Beneficial Ownership Information (BOI). In response, FinCEN has extended the compliance deadline to March 21, 2025. Businesses now have a limited time to ensure compliance and avoid potential penalties.

BOI Reporting: Key Requirements

Under the CTA, businesses must report their beneficial owners, defined as individuals who:

• Own or control at least 25% of a company, or
• Exercise substantial control.

“Substantial control” includes individuals who make major business decisions, even if they do not hold an ownership stake. Additionally, indirect ownership rules apply, meaning ownership can be attributed through multiple layers of entities. FinCEN argues that this approach enhances transparency and combats financial crimes, while the House Financial Services Committee has criticized the rule for being burdensome for small businesses.

Legal Challenges and Potential Delays

For most companies, BOI reporting was originally set to take effect on January 1, 2025, but faced legal challenges questioning its constitutionality. A December 31, 2024, injunction halted enforcement, but the February 18, 2025, ruling reinstated it. While businesses are currently required to comply, there are ongoing legislative efforts to delay or modify the rule continue. The U.S. House has passed a one-year extension that is now under consideration in the Senate. If enacted, this could extend the compliance deadline further.

Penalties for Non-Compliance

Businesses that fail to comply with BOI reporting face significant penalties:

• $500 per day for late filings.
• Criminal penalties up to $10,000 and up to two years in prison for willful violations.

Given the short compliance window, businesses should take immediate steps to determine whether they are subject to reporting requirements.

Looking Ahead

While BOI reporting is intended to enhance financial transparency, compliance remains a significant burden for small businesses. As legal and legislative challenges unfold, businesses should:

• Monitor regulatory updates, including potential Senate action on the proposed delay.
• Ensure compliance by identifying beneficial owners and understanding reporting obligations.
• Consider proactive reporting to avoid penalties, even as legal challenges continue.

For now, the March 21, 2025, deadline remains in effect. Businesses with reporting requirements should proceed accordingly.

Please contact our Global Business Services team if you have any questions or concerns about these regulations or any other international tax issue.