The Corporate Transparency Act (CTA) was adopted to bring more openness into the business world by making companies disclose their true owners. This initiative aimed to thwart crimes like money laundering by removing the veil of anonymity that some business owners exploit. The law’s relatively straightforward path hit a major snag after a trial court ruling in Alabama found the CTA unconstitutional. Despite this, for anyone not directly involved in that lawsuit, the rules still apply as per the Financial Crimes Enforcement Network (FinCEN)’s directive.
What is the CTA?
For those not aware, the core purpose of the CTA is to shed light on the “beneficial owners” of businesses. If your business is covered by the CTA, you are required to report details about the people who ultimately own and control it. This transparency is intended to help authorities detect and prevent illicit activities, enhancing accountability and transparency across the business landscape.
The Alabama Court Ruling
On March 1, 2024, the U.S. District Court for the Northern District of Alabama delivered a decision in the case National Small Business United v. Yellen ruling that the CTA violated the constitution. The trial court entered an injunction blocking the law, but the decision expressly was limited to only the plaintiffs in that specific lawsuit.
FinCEN Says the Law Still Applies
Despite the court’s ruling, FinCEN has been adamant: if you weren’t part of the lawsuit, the CTA’s requirements still apply. That means that despite a court throwing out the CTA completely, most businesses are still obligated to disclose their ownership.
Can I Just Ignore This? NO!
Choosing to ignore the requirements of the CTA can lead to severe repercussions, including substantial fines and regulatory scrutiny. The good news is the filings do not appear too onerous. The Alabama case is up on appeal so maybe the entire CTA will evaporate at some point. In the meantime, you should plan to comply to avoid exposure.
Conclusion
If you have questions about the CTA’s requirements or just want to ensure your business is on the right track, please feel free to reach out to Timothy Hughes at Bean, Kinney & Korman, P.C. at (703) 526-5582 or thughes@beankinney.com. Our firm practices in Virginia, Maryland, and the District of Columbia in addition to various other jurisdictions and can help you through this process.
This article is for informational purposes only and does not contain or convey legal advice. Consult a lawyer. Any views or opinions expressed herein are those of the authors and are not necessarily the views of any client.