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Get ready for some interesting news in the legal and business world! There's a new law called the Corporate Transparency Act that will start next year. It might affect you, so it's important to understand what it means. Starting on January 1, 2024, every small business will have to give a report each year with the names of their main owners. If you have a Trust that owns part or all of a business, that business might have to share private details about your trust, like the name of the person in charge or the people who benefit from it.
But don't worry! You might be wondering how to know if your Trust needs to be reported. We have the answers! Keep reading to find out all the important information!
What is the Corporate Transparency Act and what does it require?
The Corporate Transparency Act is a new law that was made to fight against money laundering and terrorism. It focuses on "shell" corporations, which are companies that only exist on paper and don't really do any business (like the one in the show Breaking Bad called "Vamonos Pest").
Under this law, small companies now have to say who owns 25% or more of the company and who has control over its activities. This helps to find and expose shell corporations that are often involved in illegal money activities. To follow the law, businesses have to send a report each year to a special agency called the Financial Crimes Enforcement Network. The report needs to have specific details about each owner or person in control, like their names, addresses, and copies of their IDs.
If a business doesn't send the report on time, there can be serious consequences like having to pay a fine of $500 for each day the report is late, or even going to jail for two years!
Does my Trust need to be included?
Trusts that own a business or part of a business are also affected by this law, but only in certain cases. Here's how you can know if your Trust information needs to be included:
- The law applies to companies that are officially created by filing documents with the government. So if you have a company like a corporation or a limited liability company (LLC) that you made by doing this, the law applies to you.
- But there are some exceptions. Non-profit organizations, big companies with 20 or more employees in the US and sales of $5 million or more, and regulated companies like banks and investment advisors don't have to follow this law.
- If you have a company like an LLC or a corporation, but you're not actually using it to do business, you don't have to report your Trust. The law doesn't count inactive companies.
- However, if your Trust owns part of a small, for-profit company like a family business or a local investment, you will have to report the person who benefits from the Trust to the Financial Crimes Enforcement Network.
The person who benefits from the Trust is the one who gets good things from it or has the power to make important decisions about the Trust's assets. Usually, it's the person in charge of the Trust, but it could also be the people who will get the money or property from the Trust in the future.
To make sure you report the right person, it's a good idea to contact us before 2024 and have your Trust reviewed.
Does the law affect my Trust's protection of assets?
One of the great things about having a Trust is that it gives you and your family more privacy and helps protect your assets from things like divorce or lawsuits after you pass away. Luckily, if your Trust owns a business or part of a business, it doesn't take away that protection.
The new law does reduce some of the privacy benefits of owning assets in a Trust. But don't worry, the names of your Trust, the person in charge, and the people who benefit from it are not made public. The government only uses that information to investigate financial crimes.
So, Trusts are still a good way to keep your privacy, avoid certain legal processes, and protect your family's financial future.
Guidance for you and your family now and in the future.
If you have a Trust or are thinking about making a plan for your family's future, you might be wondering how the law changes will affect your plan and what you can do about it. That's where I can help you as your Personal Family Lawyer®. Unlike some other lawyers who only work with you once, I see estate planning as a long-term relationship.
Your life and the world are always changing, so it's important to update your plan from time to time. I'll make sure to keep you informed about any law changes that might affect your plan. Plus, I offer a free review of your plan every three years to make sure it still meets your needs, just like it did when you first made it.
If you're ready to create a personalized plan for your loved ones or have questions about how the Corporate Transparency Act might affect you, schedule a free call with me today. I'm excited to help you now and in the future!
For More Information on the Corporate Transparency Act Click Here.
Disclaimer:
This article is a service of Tanika L. Finney, a Personal Family Lawyer® Firm. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Peace of Mind Planning Session, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Peace of Mind Planning Session.
The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer® firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
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