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Editorial 7 MIN READ

Trump 2.0 and the Day-1 freeze: what actually changed for formations

A 60-day pause on new and pending rules, three live cases already in motion, and a question of enforcement discretion on the CTA

The Editors
Staff, Incorporator.org
7 min read Updated
Contents 7 sections
  1. What the freeze actually does
  2. The Corporate Transparency Act is statute, not rule
  3. The FTC noncompete rule is still on appeal
  4. The SEC climate-disclosure rule, the 8th Circuit stay, and what comes next
  5. The rest of the Day-1 package, in operational terms
  6. Where this leaves the average formation this quarter
  7. Sources

resident Trump was sworn in yesterday and signed a regulatory freeze the same afternoon. Executive Order 14148, the "Regulatory Freeze Pending Review," tells every executive agency to stop sending new rules to the Federal Register, pull back any rule that has been sent but not yet published, and postpone the effective date of any rule already published for 60 days of review.

For people who form entities, three questions matter more than the freeze itself: does this do anything to the Corporate Transparency Act's beneficial-ownership filing, does it moot the FTC noncompete rule and the SEC climate-disclosure rule, and does it signal what enforcement discretion will look like over the next year. The short answers are no, not yet, and yes.

What the freeze actually does

EO 14148 is structurally identical to the freeze memorandum Biden issued on January 20, 2021, and close to Trump's own 2017 freeze. The mechanics are well worn: incoming administrations pause the regulatory pipeline for 60 days while their appointees read what the prior team pushed out the door. Agencies may further delay, withdraw, or issue supplemental notices during review. Statutes and regulations already in effect are not touched.

That last point is the one most commentary has gotten wrong in the first twenty-four hours. A freeze is an instruction to agencies inside the executive branch. It does not repeal statutes, vacate final rules in force, or reach independent agencies the way it reaches cabinet departments. It buys time, nothing more.

The Corporate Transparency Act is statute, not rule

The single most frequent question this week, from founders and registered-agent desks alike, is whether the freeze pauses beneficial-ownership reporting to FinCEN. It does not. The Corporate Transparency Act is a statute, enacted as part of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, Public Law 116-283. The reporting obligation itself flows from 31 U.S.C. § 5336. An executive order cannot repeal either.

What is in actual motion is litigation. In Texas Top Cop Shop, Inc. v. Garland, the Eastern District of Texas entered a nationwide preliminary injunction against enforcement of the CTA's reporting requirements in early December 2024. The Fifth Circuit stayed that injunction, the stay was lifted, and as of this week a second preliminary injunction from a different Eastern District of Texas judge, in Smith v. U.S. Department of the Treasury, is in effect nationwide. FinCEN has said that reporting companies are not required to file beneficial ownership information while the Smith order stands, and that no penalties will attach for non-filing in that window. That is litigation risk, not executive grace, and the posture can change on a single appellate ruling.

Practitioners split into two camps. One is filing anyway, reasoning that the information is modest, the filing is free, and the downside of a reversal followed by a missed deadline is a $591-per-day civil penalty under the inflation-adjusted schedule at 31 C.F.R. § 1010.821. The other is holding, reasoning that FinCEN has suspended enforcement and that filing now lets the government keep data it may not be entitled to collect.

Under EO 14148, the outgoing FinCEN guidance is under review with everything else. Expect enforcement discretion: a Treasury headed by Scott Bessent, confirmed this week, is unlikely to press penalties against small operators who miss filings during the litigation window, even if the injunctions are reversed.

The FTC noncompete rule is still on appeal

The FTC's rule banning most noncompete clauses, published at 16 C.F.R. § 910 and scheduled to take effect September 4, 2024, never took effect. Judge Ada Brown of the Northern District of Texas set it aside nationwide in Ryan, LLC v. Federal Trade Commission in August 2024, holding the Commission lacked substantive rulemaking authority under the FTC Act. The Commission appealed to the Fifth Circuit. That appeal is still docketed and has not been ruled on.

The freeze does not moot that appeal, but a new FTC majority almost certainly will. Trump has announced Andrew Ferguson as chair; Ferguson dissented from the rule's adoption last April. A Republican majority can dismiss the Commission's own appeal, withdraw the rule, or let the Fifth Circuit's eventual ruling stand uncontested. The practical answer for founders drafting offer letters this quarter is that the federal noncompete ban is not coming, and state law governs as it did before the rule was ever proposed.

California, North Dakota, Oklahoma, and Minnesota already bar or sharply limit noncompetes; Colorado and Illinois have wage thresholds. Delaware, by contrast, continues to enforce reasonable noncompetes under the Court of Chancery's blue-pencil tradition. A company that picked Delaware for its litigation forum gets the trailing benefit. See Delaware in April 2016: what the formation actually costs for the forum mechanics.

The SEC climate-disclosure rule, the 8th Circuit stay, and what comes next

The SEC's climate-disclosure rule, adopted March 6, 2024, has been stayed by the Eighth Circuit since April 4, 2024, in the consolidated case Iowa v. SEC. The stay is still in force. The rule has never been enforced against a single filer.

Here the freeze is almost beside the point. The SEC is an independent agency and EO 14148's reach into commissions is contested. What matters is that the incoming chair, Paul Atkins, nominated last month, is on record opposing the rule. The Commission can withdraw its defense, move to vacate, or adopt a replacement that drops the contested Scope 3 and conditional Scope 1 and 2 disclosures. Any of those ends the rule for practical purposes within 2025.

Founders drafting a registration-statement workstream this spring should plan to disclose what they would have disclosed pre-rule, monitor California SB 253 and SB 261, and not spend money on Scope 3 inventorying until the federal rule actually issues, if it ever does.

The rest of the Day-1 package, in operational terms

Trump also signed EO 14154, "Unleashing American Energy," which rescinds Biden-era climate orders and pauses disbursement of IRA and IIJA funds pending policy review. The specific IRA credits that formations often rely on (§ 45X advanced manufacturing, § 48 and § 48E investment credits, § 30D clean vehicle credits) are codified in the Internal Revenue Code and cannot be erased by executive order. They can, however, be slow-walked, and Treasury guidance finalized in the lame-duck weeks is now subject to the freeze.

EO 14158 established the Department of Government Efficiency under Elon Musk and Vivek Ramaswamy. DOGE is advisory, housed in the U.S. Digital Service, not a statutory department. Its lever is the President's discretion over staffing and priorities at existing agencies. Watch for cuts at IRS examinations, FinCEN enforcement, and the FTC's bureau of competition; those translate directly into lower compliance pressure on formations.

Commerce nominee Howard Lutnick, awaiting confirmation, will oversee BIS export controls. For cross-border formations with China or semiconductor exposure, the BIS rulemaking calendar is the one to watch; the freeze applies, but the posture toward China controls is tighter, not looser, under the new administration.

Where this leaves the average formation this quarter

A founder forming a Delaware LLC in late January 2025 is in almost the same operational position as one forming in late January 2024. File the Certificate of Formation for $110, pay the $300 annual tax next June 1, appoint a registered agent, get an EIN. The CTA reporting obligation is in suspense this week due to Smith; whether to file anyway is a judgment call.

The larger shift is not rule-by-rule. The enforcement posture has flipped. For the next two years, assume the FTC will not bring novel theories against early-stage companies, the SEC will not expand disclosure, FinCEN will not chase small-entity BOI filers, and the IRS will not staff up pass-through examinations. None of that is written into EO 14148. All of it follows from the same premise. The rules on the books still apply; the question is who is reading them, and how hard.

The freeze ends on or about March 21, 2025. The CTA will survive because its statutory base is too strong. The FTC noncompete rule will be withdrawn. The SEC climate rule is the 8th Circuit's problem to finish. If you are forming this week, nothing about the freeze changes your filing. If you are drafting a noncompete, draft to state law; the federal overlay is gone and is not coming back in this administration.

Sources

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