The new US Corporate Transparency Act has employment law related implications
Anthony J. Soukenik
by Anthony J. Soukenik
Anthony J. Soukenik is a Shareholder of Sandberg Phoenix & von Gontard and has previously served on the firm’s Executive Committee. Tony is a member of the Business Law Practice Group and a former Practice Group Leader. He focuses his practice on the areas of banking, construction, real estate, corporate law, durable medical equipment, estate planning, real estate, and federal and state taxation. Contact Tony.
On 30 September 2022, the Financial Crimes and Enforcement Network (FinCEN) issued final regulations to implement revised beneficial ownership information (BOI) disclosure rules for legal entities in what is commonly referred to as the Corporate Transparency Act (CTA), Federal Register: Beneficial Ownership Information Reporting Requirements; 2021-26548.pdf (govinfo.gov).
Effective 01 January 2024, every new company in the United States must file a beneficial ownership report within 30 calendar days. Pre-existing entities will have until 31 December 2024 to comply, unless they qualify under one of twenty-three exemptions. Wilful failure to file is a felony.
In the last 25 years the overwhelming request from clients has been to form a limited liability company. We often file articles of organisation with virtually no information other than the name, the registered agent, the choice of management and the organiser. As is the case in Missouri, many public filings in other states contain no evidence of beneficial ownership. The CTA will make it necessary for practitioners to encourage their clients to slow down and consider the compliance implications of BOI, and the Employee Retirement Income Security Act (ERISA) control group implications in the event of a client’s ownership in multiple enterprises.
Beneficial owners
All individuals who own or control 25 percent or more of a reporting company, but also all individuals who hold the authority to cause the adoption of major corporate and operational decisions at a reporting company.
For purposes of this section, the term “beneficial owner”, with respect to a reporting company, means any individual who, directly or indirectly, either exercises substantial control over such reporting company, or owns or controls at least 25 percent of the ownership interests of such reporting company. 31 C.F.R. § 1010.380(d).
Direct or indirect ownership may include: (a) joint ownership of an undivided interest; (b) ownership through another individual acting as a nominee or similar intermediary; (c) ownership through a trust (including a trustee or a settlor or beneficiary of a trust if that individual holds the authority to direct certain activities of the trust); and (d) ownership through one or more intermediary entities. 31 C.F.R. § 1010.380(d)(2).
This is an excellent opportunity for practitioners to work with clients to re-examine ERISA control group-related implications and requirements.
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