UPDATE: Client Alert: The Corporate Transparency Act Declared Unconstitutional By U.S. District Judge

We recently issued a Client Alert – The Corporate Transparency Act – Federal Reporting Required of Your Business in 2024. Since then, there has been a major development regarding the Corporate Transparency Act (“CTA”).

On March 1, 2024, a U.S. District Judge in Alabama declared the CTA unconstitutional, holding that it is not an exercise of Congress’ enumerated powers. The court then permanently enjoined the government from enforcing the CTA against the plaintiffs. While further litigation and an appeal are likely, this recent decision sparked a lot of questions for business owners who are already perplexed by the recently enacted federal reporting requirements.

Pursuant to the CTA, new entities formed on or after January 1, 2024 have ninety (90) days to provide FinCEN the personal details of their Beneficial Owner(s) or Applicant, while entities formed prior to January 1, 2024 have until January 1, 2025 to satisfy the reporting requirements. Given that the U.S. District Court holding only applies to plaintiffs from that action, you are likely still required to report your information.

Please contact our office with any questions.

About the Authors

Natalie Ohana is an associate in the firm’s Corporate & Business, Commercial Real Estate and Cannabis Practice Groups. She has worked with a range of companies, from startups to established businesses, and has experience with corporate governance and organization, formation and dissolution, and a variety of other corporate and transactional matters. As part of her transactional practice, Natalie has experience with negotiating and drafting contracts, including purchase and sale agreements, leases, non-compete and non-disclosure agreements, among others.

Seth R. Tipton is a partner of the firm and Chair of its corporate, commercial real estate, and cannabis practice groups. During his career, Seth has represented corporate clients in connection with business formation, internal governance, and mergers and acquisitions. In the latter capacity, Seth has guided privately-held companies through digital auctions, preliminary negotiations, financing, and closing of multi-million-dollar transactions on both the buy and sell side. For instance, he was counsel for the sale of a chain of New Jersey franchise restaurants for $24 million, a privately-held construction company for $8 million, a Lehigh Valley pharmaceutical company vendor for $17 million, an acute care hospital and surgical center and lease of associated real estate in $50 million dollar transaction, and a nationwide auto glass installation company for $75 million.