On March 1, a district court judge ruled that the Corporate Transparency Act (CTA) is unconstitutional. However, his decision applied only to the plaintiffs in the case: the National Small Business Association (NSBA) and its members. In an expected move, the Justice Department has appealed the decision.
While this litigation is ongoing, the Financial Crimes Enforcement Network (FinCEN) will continue to implement the Corporate Transparency Act for all other reporting companies. Failure to comply could result in hefty penalties and/or jail time.
What Does This Ruling Mean for Non-NSBA Members?
With the government’s appeal and other pending lawsuits, it may be years before there is a final ruling on the CTA. Until then, entities must comply with the act per the deadlines specified. Generally speaking, this requires filing prior to January 1, 2025 for existing entities formed before January 1, 2024 and within 90 days of formation if formed during the 2024 calendar year.
The failure to comply may result in a $500 per day (up to $10,000) civil penalty and possible criminal penalties including up to two years in jail.
LISTEN TO THE ORIGINAL PODCAST: Is Your Small Business in Compliance With the Corporate Transparency Act?
We will continue to monitor this case as it progresses. If you have any questions or concerns regarding the CTA and your reporting requirements, you can reach out to a Redpath and Company advisor here.