Client Alert: Texas Court Pauses Beneficial Ownership Filing Req.

TLDR: In 2021 Congress passed a law requiring every U.S. business entity to dislose their ownership with FinCen with a deadline of January 1, 2025 for all businesses created prior to###-###-#### At this time, due to a recent court stay, you do not need to file the Corporate Transparency Act filing for entities, but be ready to file if the court lifts the stay.

Background on the BOI Filing Requirement

The Beneficial Ownership Information (BOI) filing requirement was introduced under the Corporate Transparency Act (CTA), a provision of the Anti-Money Laundering Act of###-###-#### The CTA mandates that most business entities disclose information about the individuals who exercise substantial control over the company or own 25% or more of its equity. The regulation required businesses to disclose to the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) was intended to enhance corporate transparency and combat illicit activities, with filings set to begin January 1, 2024. The deadline to file for entities formed prior to January 1, 2024, was to be, January 1, 2025 and for all entities created during 2024, 90 days from the date of formation or incorporation. If BOI is not filed by the applicable deadline, one can be fined up to $500 per day and willful non-compliance could result in criminal penalties (up to 2 years imprisonment).

The Recent Legal Challenge

The CTA has been challenged since its inception. Most recently, on December 3, 2024, the US District Court for the Eastern District of Texas granted a preliminary injunction against the enforcement of the BOI filing finding it “likely unconstitutional” (finding, the government did not provide a tenable theory that the CTA is covered by Congress’ enumerated powers or under the Necessary and Proper Clause). The court ordered a nationwide preliminary injunction on the government’s right to enforce CTA. It is anticipated that the government will appeal this decision to the US Court of Appeals for the Fifth Circuit. However, it is unlikely the appeal will be heard before the January 1, 2025, deadline for entities formed prior to January 1, 2024.


What Should You Do? At this time, you are not required to file BOI. However, you need to stay tuned to developments. In the event the ruling is reversed you will need to file for BOI. It is unclear what the deadline will be at that time. Some of our clients are choosing to file now just in case the injunction is lifted.

We will continue to closely monitor these developments to ensure our clients are complying with corporate regulations. If you have questions about how this decision impacts your business or need assistance, please contact us.

Albrecht Law *This alert is for informational purposes only and does not constitute legal advice.