Waiting Time is Over: Prepare Now to File Your BOI Reports

Reporting  companies that are not exempt need to file their beneficial ownership information (BOI) reports under the Corporate Transparency Act no later than January 1, 2025.  Business owners in the U.S. by now have been flooded by news reports and client memos from law  and account firms alerting them to this deadline.  And yet, when asked, most business owners will say that they haven't gotten started yet because they are “waiting to see what happens.”  Based on a recent federal court decision, business owners should conclude that waiting time is over and prepare now to file their BOI reports. 

Litigation Challenges to the CTA

Like most other new laws, the CTA has been challenged in several court cases.  Most of those cases have either upheld the law or refused to restrain its enforcement.  Here is the status of those pending cases:

In National Small Business United, et al. v. Yellen, et al., United States District Court, Northern District of Alabama, Case No. 5:22-cv-01448-LCB, the district court granted plaintiff’s motion for summary judgment and the Treasury Department appealed to the 11^th Circuit Court of Appeals. The appeal has been briefed and oral arguments are scheduled for September 27, 2024. 

In Robert J. Gargasz Co. LPA, et al.  v. Janet Yellen, et al., United States District Court, Northern District of Ohio, Case No. 1:23-cv-02468-CEF, the plaintiff filed a complaint on December 29, 2023. This case was stayed by the court pending the outcome of the 11th Circuit appeal in National Small Business United v. Yellen. 

In William Boyle  v. Janet Yellen, et al., United States District Court, District of Massachusetts, Case No. 2:24-cv-00081-LEW, the plaintiff filed a complaint on March 15, 2024.  The parties have filed competing motions for summary judgment but the court has not yet ruled. 

In Small Business Association of Michigan, et al. v. Yellen, et al., United States District Court, Western District of Michigan, Case No. 1:24-cv-00314-RJJ-SJB, a business association filed a complaint on March 26, 2024.  The plaintiffs sought a preliminary injunction to restrain enforcement of the CTA but that motion was denied. The parties have filed competing motions for summary judgment but the court has not yet ruled. 

In Texas Top Cop Shop, Inc. et al. v. Merrick Garland, et al., United States District Court for the Eastern District of Texas, Case No. 4:24-cv-00478-ALM, a plaintiff business owner filed a complaint on May 28, 2024. The plaintiff sought a preliminary injunction to restrain enforcement of the CTA.  A hearing has been set on the motion for October 9, 2024. 

In Black Economic Council of Massachusetts, Inc., et al. v. Janet Yellen, et al., United States District Court, District of Massachusetts, Case No. 1:24-cv-11411-PBS., a business association filed a complaint on May 29, 2024.  The court entered a scheduling order with deadlines for the parties to file motions for summary judgment.  Plaintiffs failed to file their motion by the deadline and the court issued an order extending the deadline to October 4, 2024. 

The defendants’ reply deadline would have had been December 11, 2024 but will likely be extended into January 2025 after the extension of time given to plaintiffs. 

In Michael Firestone, et al., v. Janet Yellen, et al., United States District Court, District of Oregon, Case No. 3:24-cv-1034-SI, a plaintiff business owner and other individuals challenged the constitutionality of the CTA both facially and as-applied.  

In response to plaintiffs’ motion for a preliminary injunction, in an opinion released on September 20, 2024, the court denied the motion, specifically holding that plaintiffs were unlikely to succeed on the merits of their constitutional claims. 

The court’s decision in Firestone v. Yellen is noteworthy because the court took the time to address each of the plaintiff’s constitutional claims on a substantive basis, ruling, on each basis that the plaintiff was unlikely to succeed on the merits because the CTA did not violate the U.S. Constitution. 

The Likelihood of an Injunction Before Year-End is Remote

While lawyers can almost never say that something is impossible, we can confidently say that the likelihood of a nationwide injunction that would relieve business owners from filing BOI reports by the end of the year is remote.

The court in National Small Business United v. Yellen issued an injunction against the CTA that applied only to the members of the plaintiff association.  The court allowed the government to continue to enforce the law against anyone who was not a member of the association on May 1, 2024.   Even if the appeal of that order upholds the district court before the end of the year, that outcome is likely to be stayed pending appeal to the U.S. Supreme Court.

In contrast, the court's opinion in Firestone v. Yellen, upheld by the CTA by reviewing each constitutional objection and finding that the law was constitutional.

Because these two district court opinions conflict, it is highly unlikely that any U.S. District Court would issue a nationwide injunction before the end of the year.  If the decision in National Small Business United v. Yellen is upheld by the 11th Circuit, that decision is likely to trigger an appeal to the U.S. Supreme Court in 2025.  

Companies Need to Get Started With BOI Reports

The bottom line is that any reporting company that is not exempt should get started now to prepare a BOI report for filing before year-end.  No change to the law is going to make that deadline go away.  Collecting the required information, and collaborating with beneficial owners, will take time.  To avoid year-end delays, business owners should get started now.