Category: Estate Planning

September 8, 2023

Entities Face Looming Reporting Requirements—Preparing for the Knowns and Unknowns of the Corporate Transparency Act

Micah G. Snitzer

The Corporate Transparency Act (“CTA”), which takes effect on January 1, 2024, requires certain small- and medium-sized US corporations, LPs, LLCs, and similar closely held entities to report certain company information and beneficial ownership information to the US Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”).  The CTA is expected to apply to 32 million entities who, until now, have not been subject to any similar federal reporting requirements.

The CTA requires “reporting companies” to file a report listing:

  • Reporting company’s legal name, trade name, DBA, address for principal place of business, and tax identification number.
  • Each beneficial owner’s legal name, address, date of birth, and unique identification number from an “acceptable identification document” such as a driver’s license or passport and a copy of the driver’s license and passport.

Reporting companies created prior to January 1, 2024, must file the initial report by January 1, 2025.  Under the CTA’s text, reporting companies created on or after January 1, 2024, must file the initial report 30 days from the entity’s creation and a new report within 30 days of any changes (e.g., change of ownership or change of address) or corrections that need to be made.  Failure to meet the reporting requirements may result in fines up to $10,000, imprisonment of up to two years, or both.  FinCEN in August proposed a deadline extension for entities formed in 2024, but the details of that proposal are not yet clear.

With so much uncertainty surrounding the requirements of the CTA, it is best to prepare now for the CTA before it goes into effect.  Here are some practical tips to prepare for the CTA, whether you have old, unused entities collecting dust, are thinking about creating new entities sometime soon, or are operating full steam with existing entities.

  • OLD: Clean house.  Formally dissolve any entity that you no longer need—do this before January 1, 2024.  In particular, for single member LLCs, consult with a business attorney to determine whether the benefits derived from the entity outweigh the CTA’s reporting requirements.  If you don’t need the entity, get rid of it.  This year.
  • NEW: Act fast.  If you do need an entity—that is, if you intend to establish a new entity in the near future (and the looming CTA has not dissuaded you)—then it’s also better to do this sooner rather than later.  Specifically, do it this year, before January 1, 2024, so that its initial report will not be due until January 1, 2025.
  • EXISTING: Get organized.
    • Analyze Your Entity: In consultation with your business attorney and CPA, determine whether the entity is a “reporting company” required to file reports with FinCEN.  This requires an analysis of the entity’s structure, among certain other factors.  Document the reasons for the determination.
    • Create Procedures for Gathering Information and Filing Reports: If the entity is a reporting company, then work with your business attorney and CPA to identify what information must be collected and calendar when reports must be filed.  To the extent necessary, contact an estate and trust attorney to identify what information the reporting company may need to collect about trustees and beneficiaries of trusts that own interests in the reporting company.  Reporting companies should educate their officers, directors, managers, and beneficial owners on the importance of providing timely information to the reporting company in response to information requests so that the reporting company can file accurate and timely reports with FinCEN.  In addition, reporting companies need to develop a process of gathering, storing, processing, and real-time monitoring any changes or corrections that need to be reported.
    • Make It Easier: If the entity is a reporting company, encourage its beneficial owners to obtain FinCEN Identifiers when available (which, unfortunately, they are not yet); this will enable the beneficial owners to provide and update their personal information directly with FinCEN, improving privacy for the beneficial owner vis-à-vis your reporting company and simultaneously reducing the administrative burden for your reporting company to relay updates from beneficial owners to FinCEN.
    • Consider Amending Governing Documents: To ensure that the entity can meet its reporting obligations, governing documents (e.g., shareholders agreement or operating agreement), and even employment policies and agreements, can be amended to require all owners and certain employees timely to disclose required information or face a consequence.

There are many as yet unanswered questions about the CTA; as it goes into effect, there are sure to be more.

April 24, 2023

Death and the Automobile

Blaise Hill

Chances are, you own a motor vehicle. It is less likely that you have spent much time thinking about what happens to that motor vehicle when you die. There are many emotions that come with the death of a loved one, most of which cannot be avoided. Ensuring that your assets transfer easily at your […]

February 14, 2022

Cryptoassets and Estate Planning

Roxy Araghi

The value and popularity of cryptoassets – a term that comprises everything from Bitcoin to other cryptocurrencies and includes nonfungible tokens (NFTs) and utility tokens – has grown exponentially in recent years. In November 2021, Bitcoin reached an all-time high of over $65,000. In March 2021, Christie’s sold a fully digital, NFT-based work of art […]

October 7, 2021

COVID-19 and the Rise of Electronic Signatures

Pasternak & Fidis

Since early 2020, fewer face-to-face transactions have been possible because of mandatory social distancing. These restrictions changed the way lawyers and clients handled contracts and other business and personal transactions. The remote work environment reduced ink-to-paper signatures and increased the use of electronic signatures for contracts. Parties to a contract use the click of a […]

October 7, 2021

Avoiding Probate with the Right Plan

Christina K. Scopin

Often, when meeting with a client to discuss their estate planning, one of the first questions is, “How can I avoid probate?” Probate can be a source of anxiety for clients who want to avoid imposing on their loved ones what they envision as a long list of cumbersome tasks after their death. Probate is […]

May 20, 2021

Is Your Estate Plan Consistent with the Terms of Your Premarital Agreement?

Stephanie Perry

A premarital agreement addresses a couple’s rights and obligations to one another when their marriage ends by divorce or death.  A recent Virginia Circuit Court case, In re: Algabi v. Dagvadorj, et al., highlights the importance of ensuring that a decedent’s estate plan is consistent with the terms of his or her premarital agreement; or, […]