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Recent Legal Developments

CLIENT ALERT: NEW CORPORATE TRANSPARENCY REGULATIONS ARE HERE

THE CORPORATE TRANSPARENCY ACT

It’s official: the Corporate Transparency Act (the “Act”) has gone into effect and the BOI E-Filling system became live on January 1, 2024. Here is a shortlist of the key takeaways for reporting companies to be aware of. 

 

  • Existing reporting companies have until January 1, 2025 to file their initial report.

  • New reporting companies created or registered in 2024 must file within 90 days of incorporation or registration.

  • Reports require the name, date of birth, address and ID documentation for each beneficial owner owning 25% or more.

  • The company must also provide its own information like business name and address.

  • New companies formed after 1/1/2024 must additionally provide information on individuals who formed the company.

  • Filing is free, secure and FinCEN provides simple online reporting and guidance resources including a Small Entity Compliance Guide.

  • Reporting is generally a one-time obligation unless updates are needed.

  • Key deadlines are 1/1/2025 for existing entities and 90 days post-formation for those created in 2024.

 

How to File

BOI Reports must be submitted electronically through an online portal available on FinCEN’s website:  https://www.fincen.gov/boi.  This website also provides a link for obtaining a FinCEN ID number, and additional resources and information about the BOI reporting obligations. 

 

Penalties for Violating the CTA

Individuals who willfully fail to timely file a beneficial ownership report or willfully provide false information to FinCEN may be subject to civil and criminal penalties.  Each violation of the CTA can result in a civil penalty of up to $500 per day, up to $10,000, and up to two years of imprisonment. 

 

Don’t be Scammed!

There have been a number of recent attempts by scammers to fraudulently solicit information from entities and individuals that may be subject to the CTA’s reporting requirements. Scammers will typically send an email or letter claiming to be from FinCEN and asking the recipient to scan a QR Code or click a URL to comply with CTA reporting requirements. FinCEN does not send unsolicited information requests.  If you or your business receives any such email or letter, IT IS FRAUDULENT, and you should not send any response or interact with any URL or QR code included in the correspondence.

 

We will continue to monitor developments of the Act and its implementation to ensure that we are ready to advise you.

WHO?
Reporting companies include corporations, LLCs, and entities that are created or registered to do business
by filing a document with a secretary of state or any similar office. Also likely included, depending on
applicable state law and subject to any exemptions, are limited partnerships, LLPs, business trusts or
statutory trusts, and possibly general partnerships (if they file a document with a secretary of state or
similar office). Both domestic and foreign entities registered to do business in the United States are
included. Dormant entities might be required to file depending on whether they meet the inactive test.

WHAT?

  • Reporting company: full name, DBA, address, jurisdiction of formation or registration, TIN or other unique tax ID number shown.

  • Beneficial owners: full name, DOB, address, photo ID with ID number shown. A beneficial owner is defined as:

    •  An individual who, directly or indirectly, exercises substantial control over the reporting company. Includes senior officers (president, CEO, COO, CFO, GC).

    • Also included are those with the ability to make important decisions on behalf of the reporting company.

    •  An individual who, directly or indirectly, owns or controls at least 25% of the ownership interests of the reporting company, including convertible interests irrespective of whether these convertible interests are debt or equity, along with directly held options and warrants.

  • Company applicants (new reporting companies only, but limited): full name, DOB, address, photo ID with ID number shown.

WHEN

The new regulations go into effect on January 1, 2024, for new entities and on January 1, 2025, for
existing entities. However, entities in existence in 2024 will seemingly need to report even if they
dissolve before the applicable 2025 reporting deadlines.

ACTIONS TO TAKE NOW….
It is imperative for all business owners and leaders to determine how FinCEN’s reporting requirements impact them. Identify Beneficial Owners and familiarize yourself with the rules and requirements. The reporting requirement may cause some concern and hesitation among business owners and leaders who may want to shield assets or refuse to provide information. It is important to consult a professional if you have questions about reporting requirements. Further clarification likely will be issued over the next several months. We will continue to track the compliance and reporting obligations under the CTA.

Informational Links:
https://www.fincen.gov/boi
https://www.fincen.gov/beneficial-ownership-information-reporting-rule-fact-sheet

NAVIGATING THE LEGAL WORLD WITH ARTIFICIAL INTELLIGENCE

In the dynamic world of business, 2023 has brought forth a myriad of technological advancements, especially in the realm of Artificial Intelligence (AI). From improving the efficiency of mundane tasks to assisting in complex decision-making processes, AI is reshaping the way we work, but like all tools, it's essential to use AI judiciously, with a clear understanding of its strengths and weaknesses.  Here are a few tips for using this new and powerful tool in for legal needs:

 

  1. While AI can help you create templates and drafts, human expertise remains paramount. AI platforms might not yet cater to specific customization requirements of your deals and transactions. Rely on your legal team to refine AI-generated content.

  2. Exercising caution is vital when seeking AI assistance for legal research. As with any AI, there are chances of misinformation or 'hallucinations'. Always have any AI-generated insights reviewed by your legal experts.

  3. A major concern while using models like ChatGPT is the inadvertent sharing of sensitive data. Always refrain from sharing proprietary, sensitive, or confidential information. Once shared, data cannot be retracted and may be accessible to others, which might jeopardize your confidentiality.  Recently, Samsung employees inadvertently leaked sensitive data while using ChatGPT for professional assistance. This error underscores the need for careful handling of sensitive data.

 

While AI tools, including ChatGPT, are revolutionizing the workspace, they're not infallible. Use them wisely.

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