Federal lawsuit halts requirement that would have fined businesses $500 per day if not completed

Editor’s note: This story has been updated to correct that a federal court has halted the implementation of the Corporate Transparency Act’s beneficial ownership reporting requirements on Dec. 4. 

A federal court in Texas halted the implementation of the Corporate Transparency Act’s beneficial ownership reporting requirements on Dec. 4, meaning businesses are no longer required to comply with the reporting requirements.

Colorado officials had been raising awareness about the new law prior to the court decision, which could have cost Colorado businesses a hefty penalty if the information was not filed by 2025.

The law, formally called the Corporate Transparency Act, was enacted by Congress in 2021 to curb illicit finance. This law required nearly all corporations, partnerships and LLCs doing business in the U.S. to report information about who ultimately owns or controls them in the form of a Beneficial Ownership Information report, which is filed with the Department of Treasury’s Financial Crimes Enforcement Network.

The court ruled the requirement was likely unconstitutional, and issued a preliminary injunction barring the government from enforcing the Corporate Transparency Act.

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The federal law went into effect in January 2024. Businesses formed this year had 90 days to file, while existing businesses had until Jan. 1, 2025 to report ownership information. 

Many Colorado small businesses were at risk of facing unexpected penalties if they failed to report the proper information by the end of 2024 or provided fraudulent information. Federal penalties for not complying could reach as much as $500 per day in addition to civil and criminal penalties, according to the department.

There are nearly 690,000 small businesses in Colorado as of 2023, according to the U.S. Small Business Administration, which makes up roughly 99.5% of all businesses in the state. The small businesses are responsible for employing 47.3% of all Colorado employees, equaling roughly 1.2 million people.
Colorado had the most growth in new business applications in 2023, with a 115% increase from 2022, meaning more businesses that would have needed to comply with the reporting requirements. Other entities, such as nonprofits and publicly traded companies, are exempt from having to file beneficial ownership information.