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        Recently, a federal district court judge in National Small Business United v. Yellen (NSBU) held that the Corporate Transparency Act (CTA) was unconstitutional.[1] But does this mean that you don’t need to report any information to FinCEN?

        Unfortunately, some people think that this is the case. There are many people (including some attorneys) who are telling others that they can delay reporting their Beneficial Ownership Information (BOI) to FinCEN.

        However, this is not the case. And as it turns out, the deadlines for reporting your information have not changed.

        It is unfortunate that this misinformation has become so prevalent. However, we here at Corporate Direct believe that it is crucial to tell the truth about this case. Here are three facts that every business owner must know about this recent ruling.

  1. The ruling only applies to the named plaintiffs of the case

        The first matter is that the ruling only applies to the named plaintiffs of the case. National Small Business United (also known as the National Small Business Association) is a group of 65,000 small businesses across the country. And because the ruling only applies to these 65,000 entities, they are the only ones who do not have to report their BOI to FinCEN. As for every other business entity, they are still required to submit their BOI reports.

  1. The ruling could be overturned by the Supreme Court

        The second fact that people must know is that the NSBU case could easily be overturned once it inevitably reaches the Supreme Court.

        At the heart of the NSBU case is the issue of whether the CTA is unconstitutional. Liles Burke, the judge on the case, held that it was not. And his three grounds were that the CTA exceeded the Constitution’s limits under its foreign affairs powers, the commerce clause, and its taxing powers.

        It is worth noting that Judge Burke is a conservative judge who was appointed by President Trump. And if this case was before a liberal judge, they likely would have held the CTA to be constitutional.

        With these things in mind, how will the Supreme Court treat this case once it reaches them? While the Supreme Court does have a 6-3 conservative majority, they could still reverse Judge Burke’s holding on any of his stated grounds (especially under the commerce clause).

        Over the last few years, we have seen Chief Justice Roberts, Justice Kavanaugh, and Justice Gorsuch side with the liberal Justices on several cases before the Supreme Court. And given this recent track record, there is a good chance that at least two of them could side with the liberal justices. In this scenario, the Supreme Court could easily hold that the CTA is constitutional by a 5-4 or 6-3 decision.

  1. Other states have passed transparency acts of their own

        The third thing to know is that regardless of what the Supreme Court holds, states are beginning to enact their own transparency acts. And because corporate law has always been a creature of state law, the states are free to enact these types of corporate transparency rules.

        Many of these new rules model the CTA, and they also require reporting the same BOI to a branch of the state government.

        New York was the first state to enact such a rule. Recently, their state legislature passed the New York LLC Transparency Act (or NYLTA). NYLTA requires any LLC that is formed or registered to do business in New York to file similar BOI reports with the New York Department of State. The reporting period begins on January 1st, 2026.

       And other states are following suit. For example, the state legislatures in California and Maryland have proposed enacting similar bills. And don’t be surprised if other states propose similar bills of their own.

Conclusion

        Regrettably, there are some people out there who are providing inaccurate information on this recent ruling. But there is one thing that every business owner must know: if your business was not a named plaintiff in the case, you are still required to submit your BOI report to FinCEN. And if you don’t, your business is still subject to the CTA’s penalties. These include $10,000 in fines, and spending up to two years in jail.

        And even if the Supreme Court holds that the CTA is unconstitutional, you still may need to submit the same BOI reports to your state.

        We here at Corporate Direct care about educating our clients on the Corporate Transparency Act. For more information on the CTA, please check out our website at www.corporatedirect.com, or schedule a free 15-minute consultation with one of our incorporating specialists at https://corporatedirect.com/schedule/.

 

[1]National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.).

 

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