Legal Thoughts – Episode 4 of the Corporate Transparency Act
COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW | Transcript of Legal Thoughts
Published October 30, 2023
Topic: “The Corporate Transparency Act’s Beneficial Ownership Information Reporting Requirements”
My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, litigation and immigration law firm based in Dallas, Texas.
In addition to myself, we have Legal Assistant, Leiliane Godeiro, Law Clerks, Ayesha Jain and Mlaah Singh, and Adminitrative Assistant, Michelle Gutierrez.
On today’s “Legal Thoughts” podcast, our Law Clerk, Mlaah Singh, will be interviewing me on the important topic of: “The Corporate Transparency Act’s Beneficial Ownership Information Reporting Requirements.”
This has been a series of podcasts, and today’s Episode No 4 is an update as the enforcement date of January 1, 2024 draws near and FinCEN is putting out more public information regarding this topic.
Hi everyone, my name is Mlaah Singh and I am a Law Clerk at the tax, contracts, litigation and immigration law firm of Coleman Jackson, Professional Corporation. Our law firm is located at 6060 North Central Expressway, Suite 620, right here in Dallas, Texas.
Good afternoon Attorney; thank you for agreeing to sit with me and update our Legal Thoughts podcast audience regarding the Corporate Transparency Act’s Beneficial Ownership Information Reporting Requirements for small and medium sized American businesses. Attorney Jackson the implementation date for enforcement of the BOI reporting requirements is getting closer!
Let’s get going. Again in this 4th Episode; Attorney you are going to give our podcast audience an update on the Business Ownership Information Reporting Requirements of the Corporate Transparency Act of 2021.
So, Attorney Jackson, my first question is whether you have any updates, corrections or comments concerning the BOI reporting requirements now that FinCEN has been issuing more-and-more public guidance, publications and so on about their enforcement of the Corporate Transparency Act of 2021 on small and medium sized businesses?
ATTORNEY ANSWER – QUESTION 1
Mlaah, that is a very good question to begin with because I do have updates, corrections and clarifications to our Legal Thoughts Podcast’s Episodes 1, 2 and 3 in our previously published Legal Thoughts Podcast’s CTA series of podcast based on reviewing publications and attending webinar(s) by FinCEN.
The First thing I would like to point out is that resources are available to the public on FinCEN’s website where small businesses can learn about the BOI reporting requirements.
1.On September 29, 2023 FinCEN released a very informative publication entitled, “Small Entity Compliance Guide (BOI- Beneficial Ownership Information Reporting Requirements)”. This is a detailed step-by-step guide for small businesses. The small business owners in our audience can download a copy of this guide from fincen.gov.
2.On October 4, 2023 I attended a webinar hosted by the Internal Revenue Service entitled, “Beneficial Ownership Information Reporting Requirements”. This presentation was given by a representative from the Financial Crimes Enforcement Network. Our audience can probably get a copy of the webinar handout from FinCEN.
3.Our audience can find a lot of information about the Corporate Transparency Act on the Financial Crimes Enforcement Network’s website free of charge to the public. Just go to fincen.gov.
The Second thing I would like to point out are the following take aways from FinCEN’s webinar hosted by the IRS on October, 4, 2023:
1. FinCEN will begin enforcing the Beneficial Ownership Information Reporting Requirements of the Corporate Transparency Act of 2021 beginning January 1, 2024.
2. New small businesses approved by the Secretary of State’s on or after January 1, 2024 must file their initial BOI with FinCEN 30 days after they receive notification from the Secretary of State that their articles of organization have been approved.
3. Small businesses that were created with the Secretary of State before January 1, 2024 must file their initial BOI with FinCEN by January 1, 2025. That means they must file their initial BOI on or before December 31, 2024. Small businesses need to start getting prepared to comply with their BOI requirements; they need to notify key employees and begin gathering the correct identification documents and other information so that they are ready to file their initial BOI reports with FinCEN prior to the January 1, 2025
Continuation of Attorney’s take aways from FinCEN’s webinar on October 4, 2023 hosted by the Internal Revenue Service:
4. FinCEN expects that their might be hitches and mistakes made initially in the first filings or perhaps some businesses will not file because of ignorance of the law. FinCEN intends to give a 90 day grace period before imposing sanctions for non-willful failure to file or errors. Small businesses will have 90 days to comply and correctly file initial BOI with FinCEN.
5. FinCEN intends to impose a $500 per day civil fine on all small business owners and those with substantial control of small businesses for willful violation of the Corporate Transparency Act. Apparently there is no cap on this $500 fine and it runs until the small business comply with the law.
6. FinCEN could refer willful violators of the CTA to the U.S. Department of Justice with the recommendation of criminal prosecution. A crime under the CTA is a maximum 2 years in federal prison and up to $10,000 criminal fine upon conviction.
7. FinCEN’s representative seemed to be unsure as to whether none-lawyers could practice before the Financial Crimes Enforcement But he concluded that a BOI is a form; so, none lawyers could file it on behalf of clients. His presentation is not binding on the U.S. Government. The law is what is binding and anyone who wants to know their responsibilities under the law should read the law for themselves or seek legal advice.
8. FinCEN’s representative mentioned that for small businesses established with the Secretary of State on or after January 1, 2024; the CTA requires Company Applicants to file a report with FinCEN (1) identifying the individual who actually filed the articles of organization with the Secretary of State, and (2) identifying the individuals who directed the filing. FinCEN’s representative did not answer clarification questions related to who fits into the term Company Applicants.
9. The CTA does not require that the BOI be filed annually. However, the CTA does require an updated BOI when any of the initially reported information changes. Examples of such events that require an updated BOI, are address changes and expiration of a driver’s license or passport. Updated BOI’s must be filed within 30 calendar days of such change.
INTERVIEWER: Mlaah Singh, Tax Law Clerk
Thank you Attorney. This additional information certainly adds much value and precise detail to our general understanding from listening to our Law Firm’s Legal Thoughts podcast so far. It is important for small beneficial owners, persons with substantial control of small businesses, and even all small business employees, to know what this BOI filing mandate entails considering the potential stiff punishments that can be imposed on affected small businesses all over America for violation of the Corporate Transparency Act.
My second question for you today, Attorney, is what questions can companies ask themselves to understand whether they are to be a reporting company? Are there different types of reports required for this mandate?
ATTORNEY ANSWER – QUESTION TWO
Thank you for asking this clarifying question. I think it is very important for all members of small and medium sized businesses in America to understand the BOI reporting requirements of the CTA; not simply the Beneficial Owners and those with substantial control of the businesses impacted by the Corporate Transparency Act of 2021.
In answer to your question, I am again going to strongly suggest to our Legal Thoughts podcast audience that they obtain a copy of FinCEN’s “Small Business Compliance Guide on the BOI” because it provides a detailed step-by-step approach to help small and medium sized businesses, their managers and employees to use to determine whether they must comply with the Corporate Transparency Act’s Beneficial Owners Information Reporting Requirements and how to comply.
By no means do I want to imply that it is easy to make the correct determinations using FinCEN’s Small Business Compliance Guide; but it is certainly a good place for small and medium sized businesses to start their analysis. The guide is easy to read, straight forward but yet complex. Small and medium sized businesses should consult with legal counsel in legal matters like these that have such dare financial and potentially criminal consequences.
INTERVIEWER: Mlaah Singh, Tax Law Clerk
Mr. Jackson, that was extremely helpful. FinCen seems to be expecting Beneficial Ownership Information Reports from an extremely large number of working class small and medium sized businesses from all over this country. These reporting requirements seem like they could be a lot of additional costs in operating and running a small business in America.
You mentioned in Episode 1 and 2 of this series that Congress’ intent in passing the Corporate Transparency Act was to help the U.S. Department of Treasury to be better able to discover the ownership and control of American small businesses and insist in their efforts ferret out, detect and prevent financial crimes; such as, tax fraud, terrorist funding, and money-laundering.
Attorney, my final question for today is as follows: Are small and medium sized businesses able to comply with the Corporate Transparency Act without legal representation?
ATTORNEY ANSWER – QUESTION THREE
Mlaah, that is a very empathetic and thoughtful question; and an excellent one. I can tell your focus is on the cost to small businesses in complying with the CTA.
Do you recall what I said awhile ago. When the FinCEN representative was asked a similar question during FinCEN’s Webinar on October 4, 2023, he indicated that non-lawyers could file the BOI reports with FinCEN on behalf of clients. So I think it follows that , small business owners could also file the reports themselves. Self-filing could cut down on the cost of compliance with the CTA; but, I remind everyone in our podcast audience that law can be extremely complex.
The Corporate Transparency Act is complicated, expansive and it’s a completely new federal law designed to regulate most small and medium sized companies in the United States. The CTA became law in 2021. This new law has serious civil penalties and potential criminal consequences. Small and medium sized businesses must be careful and engage in due diligence when planning to comply with the Beneficial Ownership Information Reporting Requirements of the CTA. Our Legal Thoughts podcast audience needs to appreciate that only lawyers are trained in the law. None lawyers should not practice law whether on their own behalf or on the behalf of anyone else.
So in summary; the beneficial ownership information reporting requirements is a brand new framework of federal regulation of small and medium sized businesses in America. It is a lot to be learned by the regulators at FinCEN, the IRS and other governmental agencies. Small and medium sized businesses all over America must adjust and adapt to this CTA scrutiny. The business lawyers advising small and medium sized businesses must watch how the courts interpret these new regulations as FinCEN enforces them. Lawyers will counsel and advocate for their clients accordingly as the CTA and the BOI becomes a part of operating a small and medium sized business in America. In time we will know more about how the Corporate Transparency Act’s Beneficial Ownership Information Reporting Requirements impact American small and medium sized companies.
INTERVIEWER WRAP-UP: Mlaah Singh, Tax Law Clerk
Attorney, thank you for sitting with me today in our 4th podcast on the Corporate Transparency Act and FinCEN’s Beneficial Ownership Information Reporting Requirements. I surely hope our audience enjoyed this update in our Legal Thoughts series on the Corporate Transparency Act of 2021. By the way, our audience can send us inquires at www.cjacksonlaw.com if they have questions or wish to comment on our podcasts in this series or any of our Legal Thoughts podcasts, blogs, or Law Watch Videos posted on our U-tube Channel.
Our listeners who want to hear more podcasts like this one please subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever you listen to your podcast. Everybody take care! And come back in about two weeks, for more taxation, business structuring, contracts litigation and immigration Legal Thoughts from Coleman Jackson, P.C., located right here in Dallas, Texas at 6060 North Central Expressway, Suite 620, Dallas, Texas 75206.
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ATTORNEY’S CLOSING REMARKS:
Thank you all for giving us your ear today as we updated our Legal Thoughts Podcast Episodes 1, 2 and 3 on the Corporate Transparency Act (CTA) Beneficial Ownership Information Reporting Requirements on America’s small and medium sized businesses.
Our listeners should stay tuned for possible future Legal Thoughts podcast updates, corrections and explanatory comments as the Corporate Transparency Act is enforced by FinCEN beginning January 1, 2024.
Until next time, take care.
If you want to see or hear more taxation, business structuring and contracts litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C. Subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever you listen to your podcast. Stay tuned! We are here in Dallas, Texas and want to inform, educate and encourage our communities on topics dealing with taxation, litigation and immigration. Until next time, take care.