Get Ready: New Reporting Requirements under the Corporate Transparency Act
By Amit Patel
Effective January 1, 2024, almost every small business will be required to submit an information return to the government. A new rule under the Corporate Transparency Act of 2019 requires most companies operating in the U.S. to submit a report as to “beneficial ownership” to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). With limited exceptions, the disclosures required by the rule applies to both new and existing business entities.
“Beneficial ownership” includes any individual who, directly or indirectly, owns twenty-five percent (25.0%) or more of the ownership interest in a company. It also includes any individual who exercises substantial control over the company. “Substantial Control” includes any senior officer of the company, anyone who has authority over the appointment or removal of any senior officer or a majority of the board of directors of the company, anyone who has substantial influence over important decisions by the company, or anyone who has any other form of substantial control.
Who Needs to Report?
The rule applies to entities like:
- Corporations
- Limited liability companies
- Limited liability partnerships
What Information is Required?
The reporting requirements for each Beneficial Owner include:
- Full legal name
- Date of birth
- Current address
- Unique identifying number (e.g., passport or social security)
- Document image (drivers license or passport) containing the unique identifying number
When to File?
Companies created before January 1, 2024, have until January 1, 2025, to file initial reports. New companies formed after January 1 must file within 30 days of company creation. If there are changes during the year, updated reports must be filed within 30 days.
How Can We Help?
Bodker, Ramsey, Andrews, Winograd & Wildstein P.C. can help minimize your legal risk and maintain your entity’s reputation. We offer support at every step, including:
- Determining Reporting Company status
- Identifying beneficial owners
- Preparing for the Corporate Transparency Act implementation
- Training compliance and operations teams
Contact a member of our Corporate and Transactional Practice to ensure your compliance with the Corporate Transparency Act’s beneficial ownership reporting requirements.
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Georgia Legislature Considers Amending Business Code to Allow for Creation of Benefit Corporations
Initially introduced during the 2019 session of the Georgia General Assembly, a bill proposing an amendment to Georgia’s corporate code to allow for the creation of Benefit Corporations is again being proposed by Representative Scott Holcomb of the 81st district.
Benefit Corporations are for-profit companies that are obligated to meet strict standards of social and environmental performance, accountability and transparency. While they share with non-profit corporations a similar mission of generating an overall societal benefit, Benefit Corporations are for-profit, which can open doors to funds that might otherwise be off-limits.
A Benefit Corporation still retains the goal of generating profits for its shareholders, however, maximizing profits cannot be the underlying goal given the internal safeguards built in to the company’s structure to ensure that the underlying purpose of the company is priority number one. Because of this, investors who may have funds available to invest but would primarily prefer such wealth be directed towards creating positive societal impacts can invest in a Benefit Corporation, having confidence that company management is bound to their mission statement. Further, because non-profits can be severely limited in the level of growth and overall impact they create due to being purely charitable in nature and structure, a Benefit Corporation has the potential to expand the impact that an investment can create, far and above what a donation in the same amount would achieve.
Because the type of investor who has both money to invest in addition to a desire to maintain a positive mission statement is not common, Benefit Corporations are by no means the best fit for the average business venture. Yes, shareholders have the ability to seek profits, but the company still pays taxes at the corporate level like a normal corporation does. However, due to the strict reporting guidelines and requirements for the internal structuring of a benefit corporation, these aspects have the potential to prevent a hostile takeover by a predatory competitor, given the permanence of a benefit company’s guiding mission. For successful businesses that prefer to adhere to certain principles, fearing that a buyout would dilute or even eliminate the company’s original mission, a benefit corporation is a perfect fit.
It has yet to be determined whether Georgia will ultimately sign the legislation allowing for benefit corporations into law, and whether the availability of benefit corporations will have an overall economic benefit in Georgia, nobody can yet say for sure. Whether this form of business structure is right for your business or whether another business model has the best chance of bringing you success, Bodker, Ramsey, Andrews, Winograd & Wildstein has the knowledge and expertise to help any business owner find their identity and achieve their full potential.
Read MoreMergers and Acquisitions – Proposed Guidelines
On January 10 the US Federal Trade Commission (FTC) and the Department of Justice’s Antitrust Division (DOJ) issued Draft Vertical Guidelines concerning vertical mergers, currently open for public commentary through February 11, 2020. These guidelines detail how the FTC and DOJ analyze the potential anti-competitive or pro-competitive effects a vertical merger may create within a marketplace. Significantly, the draft guidelines depart from the DOJ’s 1984 guidelines concerning vertical mergers in favor of being more in line with the Canadian Competition Bureau’s Merger Enforcement Guidelines, signifying a likely shift in how cross-border Canada/US mergers are assessed by governing bodies.
A vertical merger, or vertical integration, is a merger between certain entities, firms, and assets within various different stages of a supply chain for the purposes of streamlining a business’ overall processes. Examples of such transactions include an acquisition of a retail company by the manufacturer, or vice versa, and have the potential to hinder or box out altogether any competition within a certain retail sphere when all aspects of a supply chain become wholly owned and controlled by one entity. While vertical mergers have the potential to create a healthier marketplace through the creation of streamlined processes and overall efficiency, regulatory schemes exist to mitigate risks of monopolistic expansion which has the potential to harm consumers. While horizontal mergers, in which two business competing within the same point in the supply chain, are a separate concern as well, vertical mergers tend to attract more scrutiny due to the all-encompassing nature of supply chain integration.
Overall, the Draft Vertical Guidelines demonstrate certain similarities with the 1984 guidelines, the Canadian Competition Bureau’s guidelines, and guidelines directed towards horizontal mergers, in addition to certain drastic departures from those regulatory frameworks, the specific impacts of which have yet to fully manifest. For these reasons, companies involved in supply chain focused activities, especially those involved in cross-border streams, should actively reassess whether or not certain transaction specifics are more likely to fall under the FTC and DOJ’s evolving methods of market analysis. The potential costs associated with running afoul of these guidelines, which in all likelihood will reflect the recent draft guidelines, can be detrimental to the survival of a business.
Bodker Ramsey Andrews Winograd & Wildstein specializes in complex business transactions and has decades of experience guiding expanding businesses through large-scale mergers and acquisitions.
Read MoreLoan and Credit Facility Agreements
Read MoreOver the years, we’ve learned that many clients do not understand the importance and contents of their loan and credit facility agreements. Of course, the number one concern for clients is whether the financial terms are accurate. What may get overlooked is what can cause exposures and costs and inabilities or delays in getting line of credit advances. These credit facility agreements contain representations and warranties, continuing obligations (covenants) and financial ratio and calculation covenants. Borrower (or Guarantor) non-compliance may result in suspension of future advances and/or acceleration or additional costs in remedying defaults. It’s not just the borrower which is affected; the lender wants to avoid external auditor issues and non-conforming loans. Good practice involves understanding and addressing finance, legal, and business issues during the commitment and document review process by both the client and counsel (in conjunction with the lender and its counsel).
Protect Business Owners and Officers-Avoid the Risk of Piercing the Corporate Veil and Personal “Alter Ego” Liability
By keeping these three basic principles on top of mind when operating and funding your business, you can spare yourself a lot of unnecessary stress and potential litigation risk when you:
- Keep (and treat) your business accounts as completely separate from your personal spending accounts – in simple terms, don’t divert or spend your business’s income or assets on your personal liabilities or expenditures – you also need to be able to separately track and account for the business’s income and expenditures
- Don’t EVER misrepresent your business’s assets or ability to pay debts to your creditors, especially in order to induce them to extend credit or to defer taking action to collect debts from your business – this is doubly so if you are an officer of the business or a person in authority speaking on behalf of the business – since you may become personally liable for fraudulent misrepresentations, and these may NOT be dischargeable in Chapter 7 bankruptcy
- Make sure that your business is “adequately capitalized” – in simple terms, don’t knowingly run up business debts beyond the company’s available assets or its ability to cover those debts
If you find yourself exposed, or feel that someone else might be liable to you for failing to respect the Corporate Veil, please contact your attorney or reach out to me at trosseland@brawwlaw.com – I have successfully represented numerous businesses and corporate officers on both sides of this question.
Read MoreHow Changes to the Tax Laws Can Affect Your Divorce Settlement
As part of the 2017 “Tax Cuts and Jobs Act,” alimony is no longer deductible by the payor, nor is it included as taxable income to the recipient. This change applies to divorces finalized after 12/31/2018.
Going forward, an alimony award providing monthly support will be paid using after-tax dollars.
Without the old tax advantage of paying alimony with pre-tax dollars, parties are increasingly resorting to monthly payments of property division rather than alimony. And while this might seem like a small matter of semantics, it can have far-reaching financial consequences.
For example, let’s say you’re negotiating a divorce settlement , and your soon-to-be ex-spouse proposes paying you monthly support. It’s crucial that you understand the impact of how this monthly support is defined in your divorce agreement.
If you’re receiving monthly support payments that are clearly defined as alimony, this affords you certain protections that you wouldn’t have if the monthly support is considered part of the agreed-upon property division.
If you’re receiving monthly support payments, but they’re considered property division, and your ex-spouse files for bankruptcy, your support payments could be discharged. In other words, they could simply go away with the stroke of a pen during a bankruptcy case. Alimony, on the other hand, is not dischargeable via bankruptcy.
Also, if the monthly support payments you’re receiving are classified as property division and your ex-spouse stops making payments, less of your ex’s net pay can be garnished to compensate you. With alimony, net pay garnishment can be as much as 50%, but with property division, garnishment is usually no more than 25%.
But there are circumstances where property division payments might be preferred over alimony payments. Unlike alimony, property division payments cannot be modified or terminated by the usual alimony termination provisions, such as death, remarriage of the recipient spouse, or a live-in-lover statute. Property division is a fixed debt, owed in full despite subsequent events.
And it is often a prudent decision to have a tax expert along with a divorce financial planner on your “team.” You might also need the help of an experienced therapist to help you deal with the emotional and psychological aspects of the divorce process.
And when it comes to the financial components of your divorce settlement, your professional team members can help educate you on the impact of issues like making or accepting periodic support payments and whether they’re considered property division or alimony.
Read MoreThe New Tax Law Creates Big Changes to Alimony in 2019
The new tax law made some big changes to alimony. In 2019, alimony payers will no longer be able to deduct the payments on their tax return, & it will be tax-free to those who receive it, reversing the way it is set up now & through the end of 2018. Click here to learn more.
Read MoreBRAWW Creates New Law in Tennessee
In today’s ever-growing gig economy, the line between contractor and employee is often blurred. For purposes of attorney-client privilege and outsourcing, a key concern is whether in-house counsel’s communications with outside consultants are protected. In an economy where contractors and consultants are used more frequently, this case promotes the in-house counsel’s role in the outsourcing landscape.
The laws differ by state, and some states have not yet addressed this area of law. Tennessee was one such state until recently when Bodker, Ramsey, Andrews, Winograd & Wildstein (BRAWW) represented The Krystal Company in a case of first impression that addressed this issue.
In Waste Administrative Systems, Inc. v. The Krystal Company, the Tennessee Court of Appeals ruled in Krystal’s favor and held that legal advice given by in-house counsel to a contractor is eligible for protection, because the contractor is a “functional equivalent” of an employee. This ruling is encouraging for in-house counsel who frequently interact with outsourced non-employees and vendors about issues of legal significance and who depend on the free flow of information that those vendors are uniquely situated to provide.
Although Georgia has not yet expressly adopted the “functional equivalent” test, Georgia federal courts have cited a case from outside of the state that allows for application of attorney-client privilege for communications between attorneys and nonemployees in certain contexts.
We congratulate BRAWW attorneys, Harry Winograd and Jessica Wood as well as paralegal Jamie Cheattom, on their hard work and victory on behalf of our client. Sloane Perras, Krystal’s SVP, Chief Administrative & Legal Officer and Tennessee counsel Jeff Thompson also participated in the successful outcome.
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