Court Issues Nationwide Injunction on Corporate Transparency Act
On December 3, 2024, in what was not at all surprising, a Texas court issued a preliminary injunction blocking enforcement and staying the compliance date of the Corporate Transparency Act (CTA). The Court found that the CTA is unconstitutional as outside of Congress’s power.
A full discussion of the CTA is included below. The Texas court found that the CTA represents a federal attempt to monitor companies created under state law and eliminates the corporate anonymity feature designed by states charged with regulating corporate formation – both in violation of the U.S. Constitution and its explicit separation of powers.
The court’s opinion is strongly written, determining that the government could not justify the constitutionality of the law, regardless of every attempt. In particular, the Plaintiff’s contend that CTA violates: (i) the Ninth and Tenth Amendments by intruding on State’s rights; (ii) the First Amendment by compelling speech and burdening individuals’ rights of association; and (iii) the Fourth Amendment by
Private Company Ownership Secrecy Is In The Past
This topic has been sitting on my list since the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) proposed beneficial ownership reporting requirements for private companies back in December 2021. The final rules were adopted in October 2022 and I’m finally unpacking this doozy. The new FinCEN rules implement provisions of the Corporate Transparency Act which, in turn, has been law since October 2019. The regulations create new federal filing requirements applicable to a wide range of entities, including operating companies, holding companies, LLCs and others. The goal of the rule is to enhance FinCEN’s ability to protect national security and the financial system, by providing information that can be used by national security, intelligence, and law enforcement agencies.
Corporate Transparency Act of 2019
The Corporate Transparency Act requires small corporations and limited liability companies to disclose information about their beneficial owners. Under the Act, a beneficial owner is an individual who (i) exercises substantial control over
