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Corporate Transparency Act

IMPORTANT NOTICE: Corporate Transparency Act | March 2024

U.S. District Court Rules Federal Corporate Transparency Act Unconstitutional

On March 1, 2024, in the case of National Small Business United v. Yellen (Case No. 5:22-cv-1448), the United States District Court for the Northern District of Alabama declared the Corporate Transparency Act (“CTA”) unconstitutional. In short, the District Court held that “the CTA exceeds the Constitution’s limits on the legislative branch and lacks a sufficient nexus to any enumerated power to be a necessary or proper means of achieving Congress’ policy goals.” However, this is very likely not the final ruling on the CTA, as the District Court’s decision is widely expected to be appealed.

As it remains unclear whether the CTA will be enforced as enacted, McCarthy, Lebit, Crystal & Liffman (“MLCL”) is encouraging our business entity clients that are subject to the CTA, and that have engaged MLCL to file Beneficial Ownership Information (“BOI”) reports on behalf of such entities, to continue providing us with all necessary BOI information. As such, we will continue to collect client BOI information, but we will refrain from reporting such information as long as the applicable CTA reporting timeline allows. McCarthy Lebit will continue to monitor the developments of this case and provide updates as they unfold.

For more information regarding this ruling and its impact on your current or future business, please reach out to your McCarthy Lebit attorney or call us at 216-696-1422.

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IMPORTANT NOTICE: Corporate Transparency Act | December 2023

Effective January 1, 2024, the Corporate Transparency Act (“CTA”), a new Federal law aimed at bolstering national security, will begin impacting privately owned business entities.

The CTA requires almost all privately owned business entities to report their “beneficial ownership information” (“BOI”) to the U.S. Treasury’s Financial Crimes Enforcement Network (“FinCEN”). The purpose of the CTA is to provide law enforcement with a new tool to combat money laundering, terrorism financing, and other illegal activity that can be furthered by concealing an individual’s identity within a business entity. FinCEN has stated that it will retain BOI in a secure database to be accessed primarily for law enforcement purposes, but such database may be made available to organizations for non-law enforcement purposes in the future.

Absent the application of a handful of limited exemptions, all privately owned corporations, limited liability companies, and any other business entity created or registered to do business in the U.S. must comply with the CTA. Business entities existing prior to January 1, 2024 will have until January 1, 2025 to comply with the CTA’s initial reporting requirements, while business entities formed or registered during 2024 will have ninety (90) days from their formation or registration date to submit initial BOI reports. Business entities formed or registered on or after January 1, 2025, will only have thirty (30) days from their formation or registration date to submit initial BOI reports. Further, after the initial BOI report is filed, business entities are required to report any change in BOI within thirty (30) days of such change. Failure to timely report BOI, or a change thereto, to FinCEN within the aforementioned time periods can result in significant monetary penalties, and in some cases, criminal penalties may be assessed. Such penalties can be levied against the business entity itself, against the beneficial owners, and against the “company applicant,” which is the individual who filed the business entity’s formation documents with a Secretary of State or similar office. Reporting BOI to FinCEN can only be accomplished through a secure online portal, which is expected to be operational by January 1, 2024.

The CTA is a significant burden that the Federal government has imposed upon private business entities, but rest assured McCarthy, Lebit, Crystal & Liffman stands ready, willing and able to be of assistance, should you expressly request our services for CTA compliance. Please note that we do not accept any responsibility to obtain BOI and file BOI reports, and we will only obtain BOI and file BOI reports on behalf of clients that expressly engage us in writing to do so.

For a more thorough review of the CTA, including an explanation of “beneficial ownership information” and a summary of the exemptions to the CTA, please see the below FinCEN CTA guidance:

For more information regarding this ruling and its impact, please reach out to your McCarthy Lebit attorney or call us at 216-696-1422.