Business Entity Updates

Business entity updates are crucial for an estate plan due to the dynamic nature of businesses and the impact changes can have on your personalized estate plan. Stay current on your businesses and consider the following: 

• Alignment of Assets: Changes in business structure or ownership can affect the types, values, and potential growth of your asset mix. Regular updates to each of your businesses ensure that your estate plan accurately reflects the current state of your business holdings, preventing discrepancies that could lead to unintended consequences during distribution. For example, a business’s operating documents could contain a paragraph that directly opposes what is listed in your estate planning documents thus giving your trustees a difficult issue to solve in determining your true and most current wishes.
• Succession Planning: Any change in leadership and ownership structure requires at least a revision with the estate plan in mind. A smooth transition, continuance, or sale of a business after your death requires cohesion among those in charge of your business and charge of your estate as a whole.  If you plan to pass your business to heirs or beneficiaries, updates are necessary to ensure there is a clear understanding of how the business will be managed, operated, or liquidated upon your passing.

• Tax Implications: Different business structures have varying tax implications. Updates to your estate plan may be needed to optimize tax efficiency, especially if there are changes in tax laws or regulations affecting your business entity. Some of these changes could involve how the step-up in basis affects the transfer of those assets to your heirs. A tax attorney may be necessary to advise on your estate to ensure maximized tax benefits to your heirs.

• Creditor Protection and Compliance: Regular updates to your businesses can allow a better shield around your business. Protecting your assets relies on the proper setup and maintenance of your business structure. A business structure is only good when the rules are followed. Compliance with current laws also avoids legal issues involving your businesses.

• Adaptation to Changing Goals: Over time, your personal and business goals may evolve as your life evolves. Regularly updating your business entities allows for adjustments that align with your current objectives and ensures minute details are covered as well. For example, when you move, you want to inform the IRS and the state in which the entity is incorporated of an updated mailing or business address to ensure important documents go to their correct place.

Understanding the reporting obligations under the Corporate Transparency Act (CTA) is crucial for every single entity previously created and created in the future. Reporting companies, comprising corporations, LLCs, and entities created or registered in the U.S., must comply with specific guidelines as of 2024. Exemptions are outlined for highly regulated or low-risk entities, but most privately held entities do not qualify for an exemption.

Beneficial owners, individuals with substantial control or ownership of at least 25% of the reporting company, and company organizers are some of the parties that must be identified in the filing with the Financial Crimes and Enforcement Network (FinCEN). If a trust holds ownership interest, individuals with control over the trust (trustees) are also considered beneficial owners or individuals that must be identified on the FinCEN filing. Some of the information asked for includes legal names, birthdates, addresses, ID numbers, images of ID documents, and tax ID numbers.

Generally, entities formed before 2024 must file the BOI report by Jan. 1, 2025, while those entities formed in 2024 have 90 days from the date of formation, and those formed after Jan. 1, 2025, have 30 days from the date of formation for the initial report. Updates or corrections must be submitted within 30 days of any changes or corrections. 

While the reported information will not be public, it will be securely stored in a database accessible to the Treasury Department for authorized purposes. Access may also be granted to law enforcement agencies and financial institutions under specific circumstances. Non-compliance may result in civil and criminal penalties for willful violations, impacting reporting companies and responsible individuals.

Please note that our firm in no way represents any government body or official source of information regarding your CTA compliance. Please see here for official information on the subject: https://www.fincen.gov/boi