Business / By Coy T. Clark and Bryce T. Sealock

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction, halting the enforcement of the Corporate Transparency Act (CTA). Texas Top Cop Shop, Inc. v. Garland, Case 4:24-cv-00478-ALM. The Court found that requiring that entities register their Beneficial Ownership Information (BOI) was “likely unconstitutional.” Based on such findings, the Court issued an order, temporarily halting enforcement of the CTA and its BOI registration requirements.

What Is the Corporate Transparency Act?

The CTA came into effect in January 2024, requiring millions of businesses to report information about its Beneficial Owners (such as shareholders and officers) with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury. Entities obligated to report under the CTA include corporations, limited liability companies, and other entities registered with a secretary of state or a similar office (Applicable Entities). Prior to the nationwide injunction issued here, BOI registration deadlines were as follows:

• Applicable Entities formed prior to January 1, 2024, had to be registered December 31, 2024;
• Applicable Entities formed after January 1, 2024, had to be registered within 90 days of their formation; and
• Applicable Entities formed on or after January 1, 2025 had 30 days to register after their formation.

What Does the Texas Federal Court Ruling Mean for Businesses?

Although the order halts enforcement of the CTA—and therefore an Applicable Entity’s duty to report its BOI—the hold is only temporary. Congress and the Court have several options to circumvent the order and re-institute the registration requirements. If this preliminary injunction is overturned on appeal, there is no telling how long Applicable Entities will have to register its BOI. It could be months, weeks, or just days from when the order is overturned.

Conclusion

Although the Court’s order halts the enforcement of the CTA for the time being, companies should still contact an attorney and gather the information necessary to register their BOI. It is best to use this time to prepare because if the preliminary injunction is overturned, those required to register will need to hit the ground running to meet the new deadlines.