On February 18, 2025, the U.S. District Court for the Eastern District of Texas in Smith, et al. v. U.S. Department of the Treasury, et al., 6:24-cv-00336 (E.D. Tex.) ruled that beneficial ownership information (BOI) reporting requirements through FinCEN under the Corporate Transparency Act (CTA) are mandatory.
For months, the necessity of BOI reporting has gone back and forth in our nation’s court systems. One side argued that the act was unconstitutional, creating unnecessary reporting systems for small businesses while potentially posing privacy concerns in the event of a breach of the Financial Crimes Enforcement Network’s (FinCEN) database.
However, those in favor of the bill argued that mandatory BOI reporting would reduce the impact of illicit “shell” companies by requiring that a representative’s name and physical address be listed within the FinCEN database.
QUOTE: The impact of the CTA is substantial. The reporting requirements of the CTA will obligate approximately 30 million U.S. businesses, including a large number of small businesses, mid-sized businesses, startups, and privately held companies. It is imperative that these businesses comply with the reporting requirements during the reporting period or be subject to fines upward of $500 per day.
What does this mean for Business Owners? Most corporations, limited liability companies (LLCs), and other entities created or registered in the U.S. must submit a BOI report unless they qualify for an exemption. Large operating companies, publicly traded businesses, and certain regulated entities may be exempt, but small businesses and newly formed entities will typically be subjected to the reporting requirements.
Updated BOI Filing Deadlines and Requirements
- Existing Companies (Formed Before January 1, 2024): Must file their BOI reports by March 21, 2025.
- New Companies (Formed On or After January 1, 2024): Must file within 90 days of their formation.
- Updates or Corrections: Any changes to beneficial ownership must be reported within 30 days of the change.
What Information Must Be Reported?
Companies required to file must provide FinCEN with:
- Full legal names, addresses, and dates of birth of beneficial owners
- A unique identifying number from an official document, such as a passport or driver’s license
- Details about the company, including its legal name and jurisdiction of formation
Penalties for Non-Compliance
Failure to comply with CTA requirements can lead to significant consequences. Companies that do not file or submit false information may face civil penalties of up to $500 per day and criminal fines of up to $10,000, along with possible imprisonment for responsible individuals.
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For more information on FinCEN, the Corporate Transparency Act, and BOI filing requirements, view our latest articles:
