In December 2024, we highlighted legislative developments at the state and federal levels that impact New York franchisees and franchisors. One key issue was the federal Corporate Transparency Act (CTA), which seems to be in a constant state of debate and legal challenge, leading to new and extended deadlines. Let’s examine where things stand in February 2025, newly announced deadlines and what it means for New York franchises.
Understanding CTA
Enacted on Jan. 1, 2024, the CTA applies to many U.S. companies, including franchises. It requires reporting companies to file beneficial ownership information (BOI) with the Financial Crimes Enforcement Network (FinCEN). The law aims to help the U.S. Department of the Treasury combat financial anonymity that enables crimes such as corruption, drug trafficking, and terrorism.
Subsequent to enactment, various court actions were commenced to stay enforcement of the law including Smith, et al. v. U.S. Department of the Treasury, in which the Judge stayed FinCEN’s regulations implementing the BOI reporting requirements.
The Big News For Franchises
However, on Feb. 19, 2025, FinCEN announced that BOI reporting requirements were back in effect, with a new deadline of March 21, 2025 for most companies.
The path that led to the present has lots of twists and turns. The preliminary injunction issued by the federal judge in Smith, et al. v. U.S. Department of the Treasury, et al., put CTA enforcement plans on hold in January 2025. On Feb. 5, 2025, the U.S. Department of Justice—on behalf of Treasury—filed a notice of appeal of the district court’s order and, in parallel, requested a stay of the order during the appeal. On Feb. 18, 2025, the court agreed to stay its Jan. 7, 2025 order until the appeal is completed.
Given this decision, the requirements of the CTA are no longer stayed. Thus, subject to any applicable court orders, BOI reporting is now mandatory for most reporting companies.
(Of note, however, the injunction issued in National Small Business United v. Yellen remains in effect, but the stay of enforcement is limited to the plaintiffs in that action.)
In FinCEN’s February 19 announcement, it noted that notwithstanding the March 21, 2025 deadline:
“Reporting companies that were previously given a reporting deadline later than the March 21, 2025 deadline must file their initial BOI report by that later deadline. For example, if a company’s reporting deadline is in April 2025 because it qualifies for certain disaster relief extensions, it should follow the April deadline, not the March deadline.”
With the CTA reinstated and the March 21 deadline looming, reporting companies should speak with their NY franchise lawyer to ensure compliance.
New York Franchises and Transparency
The CTA may be the proverbial volleyball between federal courts and FinCEN. But regardless the outcome of that match, New York’s LLC Transparency Act (S.995-B/A.3484-B) is still active. This state transparency act mirrors some of the federal law’s objectives. This state-level law signed in 2023, requires LLCs to disclose ownership information to the New York Business Entity Database, managed by the New York Department of State.
This introduces additional compliance requirements for franchises and other businesses operating in New York. Members of LLCs should contact NY franchise lawyers to ensure they navigate both state and federal reporting requirements.
Contact Lusthaus Law
Lusthaus Law can help New York franchisors and franchisees understand how legislative changes impact their businesses. Lusthaus Law has published two complimentary e-books and our Insights blog is regularly updated to reflect industry trends and client success stories.
Contact us today to learn more about how Lusthaus Law P.C. can help you navigate a clear path for your franchise’s success.
