What’s your favorite dystopian fiction? Can you imagine a future like 1984, where the government watches and controls every aspect of your life? Or more like Brave New World, where the government uses sex, drugs and entertainment to keep the populace docile? Maybe Mad Max is more your style, with a barren post-apocalyptic landscape? Or do you go for Idiocracy, in which the world has just become dumber and dumber?
Why am I asking these questions? Because I just went through filing my initial report for the new Corporate Transparency Act. And that has put me in a very bad mood.
Before I tell you about my experience, let me answer the biggest questions people have been asking about the new CTA: When do you have to report, and who has to report?
The “when” is easy: The initial report has to be filed during 2024. After that if there is a change to the information, you have to file an update. Why did I file at the beginning of 2024? Because I am a glutton for punishment. But also because, as a lawyer, I wanted to be able to inform my clients about how the process works.
As to who has to file this report, almost any corporation or LLC has to do it. There are a few exceptions (23 of them, to be specific). You don't have to file if you are a bank, brokerage firm, insurance company, or nonprofit. And you don't have to file if you are a big company, with over 20 employees and at least $5 million in revenues each year. Why do those big corporations not have to file? Because they already have to file that information with other agencies, so there's no reason for them to have to duplicate. People assumed that with a name like Corporate Transparency Act, this was something that would apply to big, Wall Street-type companies, but actually it’s the opposite.
But that means that your little bitty Limited Liability Company, which you use to hold your rental unit, has to file. And so does the corporation which you use for your freelancing work. As long as it has something in it, even just a bank account, it has to file.
Trusts, by the way, do not usually have to file. However if the trust owns an LLC or corporation, the LLC or corporation will still have to file.
So let me recount my experience. I figured Kenneth Kirk, PC would be an easy one. After all it is a simple corporation, I am the sole shareholder, director and officer, and I had all of the information at hand. And not only am I a lawyer who is used to dealing with government forms, but I already read a lot of the relevant parts of this Act. This should be easy-peasy, right?
Spoiler alert: It wasn't.
I did manage to get through it. It took me about 35 minutes, which I suppose is not too bad. I think I did it correctly; at least so far the FinCEN SWAT team has not showed up on my doorstep (I assume they have a SWAT team, since almost every other federal agency seems to have one. I'm pretty sure the Congressional Library Advisory Board has its own SWAT team).
There are several ways to do this. You can file it directly online by typing in the information, or you can download it as a PDF. I took the first option, but if you have the necessary software, I recommend doing a PDF, so you can save it and go back if you’re interrupted. There was also an option of calling the agency but I cannot imagine how long that would take, so I didn't try.
The direct online version has little “help” links throughout, but they aren't always helpful. One of the first problems I ran into was that it asked if this was an ongoing reporting entity. The help button told me that the answer was yes if the entity was created before Jan. 1, 2024. However when I answered yes (since I created the corporation years ago), I wasn't able to do anything after that. Apparently what they meant was, this entity had already filed one of these reports before Jan. 1. That is not what the help button said though.
And there were just a lot of these little annoyances. I missed the fact that even though I had entered Alaska on an address, I also had to clarify that it was in the United States. When I was informed at the end that the form was incomplete, and I backtracked and found that error, I clicked on United States, but then it emptied the box that said the state was Alaska. I didn't discover that until the end, so I had to go all the way back and check the box for Alaska again. You get the picture.
So I don't know how difficult this will be for people who don't normally deal with this kind of stuff, and perhaps have a more complicated scenario, such as multiple owners. But it does appear to be doable, with some effort.
They did make one improvement over the last few months. Originally the online reporting system was going to be called the Beneficial Ownership Secure System. The acronym was BOSS. Apparently their PR department figured out the problem with that, and now it is called a Beneficial Ownership Information Report.
But it's still a big pain in the boss.
Kenneth Kirk is an Anchorage estate planning lawyer. Nothing in this article should be taken as legal advice for a specific situation; for specific advice you should consult a professional who can take all the facts into account. Meet the new boss… oh wait, I used that one last year.
