The CTA, aimed at enhancing transparency by mandating companies to disclose beneficial ownership information to FinCEN, faced legal challenges from small business owner Isaac Winkles and the NSBA, who argued it exceeded Congress’s constitutional authority.
The court found that the CTA’s reporting obligations went beyond what Congress was constitutionally empowered to enact, particularly under Article I, and encroached on several constitutional amendments. Despite the ruling, only NSBA-affiliated businesses are immediately affected. This affects an estimated 65,000 NSBA members, shielding them from CTA reporting requirements.
Business owners are advised to continue fulfilling CTA reporting obligations pending further developments. Failure to comply could result in substantial civil penalties. The government is expected to appeal the ruling, and the court’s decision will stand unless a stay is granted. The appellate process, including the possibility of seeking a stay from the Eleventh Circuit Court of Appeals, could prolong resolution for over nine months.
As always, if you have any questions about buying or selling a business or business law generally, please don’t hesitate to contact us!