Lexlaunch.com has been designed to help small businesses navigate the LLC formation easier, while still getting our clients the legal help they need.  So, when FINCEN (basically the IRS criminal enforcement division) decided to require entities to disclose beneficial ownership information, we dove in to help you figure this out.  

We’ve summarized, below, what you will need to know about this new reporting requirement for small businesses and are here to help you stay compliant.  Please make sure you do stay in compliance, as there are some pretty severe penalties in place if you are not.  

Reach out to Denker Law Firm LLC directly to assist with compliance.  (816) 434-6610 or tdenker@denkerlawfirm.com.  We’ll be working on a more streamlined approach for you once we have access to the filing system.  

What is it, and why are they requiring this?  

You may, or may not, have heard that the U.S. Treasury Financial Crimes Enforcement Network (FINCEN) has enacted what they call the Corporate Transparency Act.  Essentially, they have put into place a reporting requirement due to the fact that individuals will use business entities for illicit activities (i.e. money laundering, terrorism, fraud, etc.).  

Their stated goal is to set a federal standard for incorporation practices, protect commerce, help national security and bring the U.S. into compliance with international standards.  The Secretary of the Treasury will maintain the information, and they are only to make it available to authorized government authorities.

Ultimately, they want to know who owns what company.

What entities have to report?

All entities formed within a State or registered to do business in the U.S. are required to report, unless they meet one of the exceptions.  While there are several exceptions listed, basically it can be summed up to only include:

• Those entities already registered with or providing this information to the federal government in some way;  
• Non-profits
• Entities with more than 20 employees, more than $5,000,000 in revenue and are physically located in the U.S (all must apply);
• Entities controlled by another exempt entity;
• Entities that have been around for more than 1 year, are not engaged in active business, not owned by a foreign person, have not changed ownership in the last 12 months, have not received more than $1,000 in the last 12 months, and does not own another entity (all must apply); or
• Entities that get the Secretary of the Treasury, the Attorney General and Homeland Security to agree don’t have to report.

This seems like a lot of exceptions, but generally speaking, if you actively operate a small business in any state in the U.S., you will more than likely need to report.

When do you have to report?

If your entity was formed before January 1, 2024, you will need to file your initial report no later than December 31, 2024.

If you are forming a new entity on or after January 1, 2024, but before January 1, 2025, the report will need to be filed within 90 days from when the new entity was formed.

If you are forming a new entity on or after January 1, 2025, the report will need to be filed within 30 days from when the new entity was formed.

In addition, if there is any change to the ownership of your entity, they do require that you report that within one year from that date in which that change in ownership occurred.  

What do I have to report?

Essentially, they want to know basic information about the company, as well as who everyone is that owns at least 25% of the entity or exercises substantial control over the entity.  For entities formed after January 1, 2024, the company applicant will also need to be reported (the person that filed the entity with the state).

A beneficial owner cannot be: 

• a minor child, 
• a person acting on behalf of another person, 
• a person who is only an employee of the entity who’s control is only as a result of that employment status, 
• a person who’s interest is only through an inheritance, 
• a creditor of the entity (unless the creditor has substantial control or at least a 25% ownership)

What exactly is “substantial control”?  FINCEN’s chart that they provide on their site to explain this is below.  If you fall into any of these categories, it applies to you.  

Substantial Control

Senior Officer

Any individual holding the position or exercising the authority of a:

1. President
2. Chief Financial Officer (CFO)
3. General Counsel (GC)
4. Chief Executive Officer (CEO)
5. Chief Operating Officer (COO)

or any other officer, regardless of official title, who performs a similar function as these officers.

Appointment Or Removal Authority

Any individual with the ability to appoint or remove any SENIOR OFFICER or a majority of the board of directors or similar body.

Important Decision-Maker

Any individual who directs, determines, or has substantial influence over important decisions made by the reporting company, including decisions regarding the reporting company’s:

1. Business, such as:

• Nature, scope, and attributes of the business.
• The selection or termination of business lines or ventures, or geographical focus.
• The entry into or termination, or the fulfillment or non-fulfillment, of significant contracts.

2. Finances, such as:

• Sale, lease, mortgage, or other transfer of any principal assets.
• Major expenditures or investments, insurance of any equity, incurrence of any significant debt, or approval of the operating budget.
• Compensation schemes and incentive programs for senior officers.

3. Structure, such as:

• Reorganization, dissolution, or merger.
• Amendments of any substantial governance documents of the reporting company, including the articles of incorporation or similar formation documents, bylaws, and significant policies or procedures.

Catch-All

Any other form of substantial control over the reporting company. Control exercised in new and unique ways can still be substantial. For example, flexible corporate structures may have different indicators of control than the indicators included here.

The post How does the Corporate Transparency Act Affect My Business? appeared first on Denker Law Firm.

As a fellow small-business owner, I am seeing and experiencing the effects of the COVID-19 pandemic.  While I run a very small business I do have an employee, that employee’s family, and my family relying on my ability to navigate today’s turbulent waters.  Every business is being affected, mostly negatively.  The more positive calls I am having involve my business owner clients who run truly essential businesses that are actually helping us through this crisis (think healthcare and cleaning).  There are some great business ideas coming out of this, but consumers are only doing so much.  Everyone is tightening their belts, as no one knows how long this will last.

Where should small business owners be looking for help?

The CARES Act has been passed by Congress to provide some economic relief.  The two key ways I want to focus on is through an SBA loan they’re calling the Paycheck Protection Program or through a variety of business tax provisions.

The Paycheck Protection Program appears to be a great opportunity to keep supporting your employees while making the necessary adjustments in your business.  The CARES Act is making this particular SBA loan much more attainable and possibly forgivable. The goal here is to help businesses keep their employees.  If you’ve laid off or reduced salary levels, there is forgiveness if those employees are quickly rehired or restored to previous salary levels.  Here are a few key factors:

• The loan is available to all small businesses (under 500 employees) who were in business on March 1, 2020, and had employees (nonprofits, independent contractors, veteran organizations and tribunal concerns also qualify).
• There is no requirement of collateral nor a guarantee.
• The amount received will be calculated based on what your business has been paying for payroll.
• The borrower and lender fees are waved
• The maximum interest rate is .5%, with a 2-year term, and payments deferred for 6 months.

These terms and rates are already pretty great, but it gets better (and really why everyone should take a hard look at whether this loan is a good fit).  Up to 100% of the loan may be forgiven.  The amount forgiven will be based on how the loan is used over the initial 8 weeks, starting at the loan origination date.  If all employees are kept on the payroll for 8 weeks, then portions that are used for payroll, rent, mortgage interest or utilities are forgivable.  Up to 75% of the forgiven amount needs to be used for payroll.

Starting April 3 small businesses and sole proprietorships can apply.  Starting April 10, independent contractors and self-employed individuals can apply.

At worst this looks like an extremely cheap way to get access to cash.  At best your business is being given a chance to keep paying those people who are relying on you as a business owner while you figure out how to adapt.  Even if the manner in which you use it ends up not getting forgiven a business is not going to find loan terms this generous anywhere else, and possibly (hopefully!) never again.

Now for a couple of the possibly helpful business tax provisions.  The CARES Act is also helping through the tax code.  Two notable modifications involve payroll taxes.

1. Employers may be eligible for a 50% refundable payroll tax credit on wages paid up to $10k during the crisis. This is for businesses who were disrupted due to COVID-19 and saw a decrease in gross receipts of 50% or more when compared to the same quarter last year.  The credit is for all employee wages if the company has 100 or fewer employees, or for employees who have been retained but are not currently working due to the crisis in companies with more than 100 employees

2. The social security tax part of the employment taxes (6.2% of the 7.65%) can be deferred. This means for those payroll taxes the business is paying out-of-pocket for their employees, they can basically get an interest free loan from the government, and not have to make a payment on those taxes for a long time.  Please remember that deferred means you still have to pay, but payment looks to be done in two payments (50% of what is owed) with the first paid on December 31, 2021, and the last paid on December 31, 2022.  From what I can tell, this deferment may not be available for a business that receives a forgivable loan through the Paycheck Protection Program.

There is a lot more to the CARES Act than what I am discussing today, including help for individuals.  The government is going way beyond what I would have expected them to do to help us through this.

The post What Is the CARES Act Doing for Small Business? appeared first on Denker Law Firm.

But what if something tragic happens to you?

It may be uncomfortable to think about, but it is important to plan for your child’s well being in the future, even if you’re not around. A decision needs to be made about who is going to raise your child if you can’t. You may have grandparents, siblings, aunts, and uncles, or even good friends that you might consider. However, the best place to start may actually be with who you would NOT want to raise your child.

More often than not, clients want to make sure a certain person or persons are not allowed the opportunity to raise their children. It may be easier to pick who you would not want than who you would want. What it comes down to is, if you don’t name who you want to raise your children the court does it for you, and if the court makes a bad choice it is your child who will suffer the consequences.

Now that you have ruled people out, you need to find your candidates. Make a list of the factors you are considering. Adding some logic to such an emotional decision will not only help find the right person, but it can rule out the wrong person as well.

When you have a list of people in mind, the most important thing left to do is speak with your possible choices and make sure they are willing. Discuss with them if they are not only capable but comfortable with taking on this responsibility. It is not safe to just assume someone will raise your children. You may be leaving a life insurance policy to lessen the financial burden, but as you may already know, being a parent is a 24/7 job.

Once you have made the right decision for your family, make it legal and have your Guardianship Will with Minor Trust drafted to represent that decision. If you don’t have that done, all the time and effort you spent deciding on the right person will be wasted, and the court will still make the choice for you. You never know what the future may hold for your family, but it is important to be as prepared as possible.

The post Who is Going to Raise Your Children? appeared first on Denker Law Firm.

Most of us remember the Terri Schiavo story. To remind you, Terri suffered an accident that resulted in serious brain damage and was in a persistent vegetative state. Terri did not have a Directive and so a seven-year legal battle ensued between her husband and friend, who wanted the life-prolonging procedures to be removed, and her parents, who wanted her to continue on life support hoping for a recovery. In the end, the decision was made by the courts. This situation cost the family constant and prolonged heartache, thousands of dollars, and at a certain point, Terri went on government aid/taxpayer money. If Terri had just had a Directive, it would have been clear to all her family members what her wishes would be, and the fighting could have been avoided altogether.

What does all this have to do with pregnancy? The reality is, even simple medical procedures include some degree of risk, and while pregnancy and giving birth rarely cause any serious risks, some risk is still present. Many aspects of our lives are unpredictable and out of our control. What you can control, however, is how you plan for the unknown. So during all of the planning and preparation you are going through to protect your new child, take the time to prepare and protect yourself too.

A Directive not only provides the person you name the power to make health care decisions you are unable to make, but it also tells them what you want. These are very emotional and sensitive decisions to make, and only you can really know what you want. Have your Power of Attorney for Health Care and Health Care Directive drawn up and remove the burden of that decision from your loved ones.

The post Do I Need a Healthcare Power of Attorney Before Having a Baby appeared first on Denker Law Firm.

Every person needs to have an estate plan, no matter how simple their situation may be. It only takes one small mistake to significantly reduce the value of the property is inherited and the time it takes to actually inherit it. An instrument commonly used to help avoid that mistake is called a Trust, and a common question clients ask is whether they need one. To be able to assess whether or not you need a Trust there are several considerations to take into account.

Trusts come in many different forms and have many different purposes. They are extremely efficient instruments used to plan an individual’s estate. Trusts can be living or testamentary; revocable or irrevocable. Trusts help avoid probate and paying estate taxes. They also help protect the assets and the beneficiaries of the estate. When used properly they will save your family all of the money, headache, time and hassle that could be incurred in an improperly planned estate.

The main reason I wouldn’t recommend a trust to someone would be if it were not cost effective. One of the first things I ask my clients to do when beginning the estate planning process is to figure out their net worth (assets minus liabilities). This includes real property, bank accounts, life insurance, retirement accounts, debt, etc.; and it usually adds up to more than what most people realize. However, if I look at the estate and see that the amount of debt significantly reduces or eliminates the value of the assets then consideration needs to be given to a more cost-effective estate plan.

Another reason would be if you have a very simple distribution plan. Only having one or two heirs who don’t have their own children can leave things pretty simple, and we can use alternative vehicles to accomplish the plan you want to be laid out.

A third possible reason would be if your only asset is a retirement investment account. These accounts have some very stringent rules regarding on-death transfers and the tax benefits of listing a person versus a trust should be explored with a professional.

Essentially, whether you set up a Trust or not is ultimately your decision but it is your lawyer’s responsibility to provide you with other alternatives as well as the pros and cons of each plan. These alternative plans should all include a Will, but should definitely NOT be limited to just a Will. If an alternative plan to a Trust is used it is very important to remember the following: (1) it will take careful planning to make sure they are following the overall estate plan. Even the most well-crafted Will won’t undo a careless overall plan; (2) the initial efforts of proper titling of the assets are absolutely crucial to the execution of your plan; (3) it will require constant awareness, and maintenance/updating any time there is a change to your family, property or location; and (4) if the only thing in your estate plan is a Will you need to find out what is missing.

The post Why You Don’t Need a Trust appeared first on Denker Law Firm.

After naming a possible guardian for your children, the next most important thing is to protect your children from themselves. No matter how responsible or frugal you think you’ve raised your kids to be there’s a certain level of irresponsibility people experience as young adults that go along with not being under their parents’ watch all the time.

Proper estate planning for anyone with children should definitely include having a Trust set up to help prevent your children from making monetary decisions you wouldn’t want them to make. Whether the Trust is built into the will or set up as a living trust, the Trust provides the necessary flexibility to limit when your children get their inheritance and can help set them up to make their life less stressful as they start their own family. In fact, the stipulations you can place in a trust are practically endless!

The question to think about before properly completing your estate plan is “How old is old enough?” Once you figure that out, make sure you incorporate this decision into your family’s plan.

The post Your Child’s Inheritance – Protecting Them from Themselves? appeared first on Denker Law Firm.

On my last blog, I made some references to “non-probate planning,” without really defining probate. Simply put, probate is the department in the courts that deal with passing property to heirs at a person’s death. However, the process itself is not as simple as the definition. There is a multitude of steps and rules that need to be followed. Is there a Will? What property is passing through the will? Who gets what? What if two of the heirs want the same piece of property? Is there enough money in the estate to pay the expenses, or will the heirs have to pony up their own money? The list of questions goes on and on and rarely is the answer simple. Here are a few of the more common questions I get. If any of this relates to you, make sure you talk to an attorney before acting. This is only generic advice, and may not directly apply to your situation.

When my parent dies am I responsible to pay off their debts? 

Basically, the answer is no. The only way you should pay any debts off or agree to pay debts off of the parent is if you were already obligated to pay off that debt, to begin with. Otherwise, those should be dealt with accordingly when settling the probate estate.

Should I open up a probate estate if there’s more debt than assets? 

Probably. This answer depends on the situation (the type of debt, type of property, etc.). The ultimate goal in these estates is to maximize the value of the assets to pass to the heirs while still paying off the necessary creditors pursuant to what the law provides.

If there is a Will, does that mean the property does not have to go through probate? 

No. This is a very common misconception. First off, everyone does need a Will. The Will provides a safety net in the event part of the person’s estate plan is not executed accordingly, is not modified when a triggering event occurs, or some extraneous event causes a probate case to be opened by a 3rd party (i.e. creditor, disinherited heir, etc.). However, the Will does not avoid probate.

The good news is that probate is completely avoidable, and planning to do so is one of the essential elements of every estate plan I put together for my clients. There are quite a few methods that can be used, and some are better than others. The key elements to having an effective non-probate plan are to (1) implement your plan immediately after you execute the rest of your estate planning documents; (2) review and update it when necessary; and (3) make sure it accurately reflects your chosen estate plan.

The post What Do You Mean Probate? appeared first on Denker Law Firm.

Estate Planning is not just about planning what happens when you die. It’s also about planning for the possibility of you becoming incapacitated (unable to make your own decisions). No one expects tragedies but unfortunately, they are a fact of life. It’s cruel but inevitable. Did you know that according to the Highway Patrol, in 2010, there were 54,875 people injured in car crashes just in the state of Missouri? And I see more and more people looking at their phones while they drive every day.

Back in September, I talked about the Health Care Power of Attorney, which is needed to plan for your incapacity. Well, the Power of Attorney for Finance is a separate document that also comes in very handy. Basically, this gives the person you designate the ability to handle your financial affairs in the event you can’t. It includes everything from paying your bills to selling your property to handling some overlooked last minute estate planning.

This Power of Attorney for Finance can either be durable or springing. If it’s durable, that provides quite a bit more flexibility and allows the person’s agent to sign on his behalf in the event he is unavailable. A Springing Power of Attorney, on the other hand, only becomes enacted upon the actual incapacity of the person. My client’s husband did not have any type of power of attorney in place, and because of it, he exposed his wife and two little girls to the possibility of losing everything they’d worked so hard to attain.

So at what point should someone do this type of planning? Planning for one’s incapacity needs to start the second someone becomes a legal adult. Once that happens, your parents don’t have the authority to make those decisions for you anymore, and signing the marriage certificate does not provide your spouse with this authority either.

Fortunately for my client, she had some close relatives that ended up being able to help her through the difficult times, and she was able to save the house. She was lucky she had a reliable support system, but a simple power of attorney for finance would have prevented the situation from escalating to the point it did.

The post Why Can’t I Sign On My Husband’s Behalf? appeared first on Denker Law Firm.

Whether a person is listed as the trustee on a trust or given power of attorney on someone’s behalf, that person is being provided what is called a fiduciary responsibility. They have access to sensitive financial information and are responsible for properly handling such information. Unfortunately, this responsibility does give the ability for misuse, abuse or even stealing. If abuse were to happen, the fiduciary would be held accountable by the beneficiaries. But what if the beneficiaries didn’t know any better until it was too late?

Often times, trusts are set up to where the beneficiaries’ rights to receive their share is not until a pre-determined date in the future (age, college degree, etc.). In fact, if you read my October blog entitled “Your Child’s Inheritance – Protecting Them from Themselves”, encouragement of using this tactic is discussed in greater detail. While the beneficiary may be able to receive financial assistance with some living expenses, they don’t have full access to the actual property in the trust. This also means the beneficiary is not necessarily keeping an eye on, or know to keep an eye on, the trustee’s activities and how the trustee is investing the property.

Without getting into the technicalities of what the uncle was doing wrong, basically, the uncle is held to the Prudent Investor Standard. He is not allowed to use the trust resources for his own personal gain, and he’s also supposed to handle the investments to the benefit of the beneficiaries.

When people contact us to get their estate planning done, often times they’ll be able to round up what property, bank accounts and investments they have, but overlook what appear to be simple decisions like, “who is going to handle my money if I can’t?”. When in reality, this is just as important. So how do you pick who this person should be?

When you are dealing with the financial power of attorney, I strongly recommend choosing someone who you not only trust but who is local. If you name someone that is living several hours (or a flight) away, they are not really in a good position to handle the day to day financial affairs you’d usually be dealing with yourself. It’s possible but certainly difficult. You may have seen the television commercial recently about how a stranger gives a random person on the street a briefcase full of money and tells them to hold it until they get back. This could be a good test question for you. If you give the person you want to name a bag of money and ask them to pay your bills while you’re gone do you think they’d be willing to do this, AND not abuse the power you’ve given them?

The post Do You Really Trust Them? appeared first on Denker Law Firm.

Like creating your estate plan, adopting a child is a completely unselfish act and is an opportunity to provide that child with a better life. Adoptions can occur in many different forms. They can be international or domestic, it can go through a state agency or a private agency, and adoptions could be for a child you’ve never met, or possibly a step-parent adoption.

With regards to the estate planning aspects, I’d just like to touch quickly on how a child may be viewed by the law. If a child is legally adopted, that child is treated as a direct heir of the adopting parent(s), just like a child naturally born of the parent. However, like what my client’s sister experienced, this does remove all legal rights that child would have had with their biological parents. Many times the loss of those rights does not matter, but it would matter in a step-parent adoption if the biological parents die after the adoption takes place and the child was left out of their estate plan.

On the other side of the coin, if you have a step-child and don’t properly create your estate plan and/or go through the actual adoption process then if something happens to you, this child that you’ve grown to love, and invested so much time raising, will be completely left out of your estate. Whether a person is adopting a child, or has their own child adopted by someone else, it’s important to address this in the overall estate plan.

If you want to learn a little more about the adoption process, I’ve asked an excellent attorney, Lisa Hansen, who handles adoptions, to provide a little more information for you. Hope this is helpful. If you’d like to contact her, feel free to send me an email at tdenker@denkerlawfirm.com.

Different Types of Adoption Agencies: There are many different types of adoptions. There is grandparent adoption, step-parent adoptions, and embryo adoptions to name a few. However, the most common adoptions are done through state agencies, private agencies, and attorneys who handle adoptions.

State Agencies: In Missouri, the state agency to adopt a child through is the Missouri Department of Social Services. You can become an adoptive parent by first becoming a foster parent or you can apply to be an adoptive parent from the start. Although you can get a newborn it is more common to have a child that has been in the system for a while. There is an adoption subsidy that you may be eligible for if you adopt through this method.

Private Agencies: There are many private adoption agencies both in the KC Metro area as well as nationwide that people can use to adopt a child. It will depend on how far reaching you want your search for a child to be as to what agency you use. Do careful research as to the agency you use. Make sure they have the proper credentials. Most agencies will have previous clients available to contact so that you can discuss the process with them and get feedback as to the agency.

Attorneys: There are attorneys that specialize in private adoptions. Not many attorneys do this type of law due to the number of agencies that now do adoptions. Again, check credentials and experience with handling this type of law.

Different types of adoption: Another aspect to keep in mind when choosing an agency is the openness of the adoption. There are basically three levels of disclosure: Open, Semi-Open and closed.

Open: This type of adoption is where the birth parents and the adoptive parents know who each other are and keep in contact throughout the child’s life. This could be monthly letters, phone calls, pictures, e-mails etc. It also usually involves regular meetings between the parents and the child. You will usually see this type of adoption when it is between family members.

Semi-Open: This is where the birth parents and adopted parents may meet at some point. There have been instances where the adoptive parents get to be in the delivery room. Usually, under this arrangement, the adoptive parents will send pictures and letters through the adoption agency to the birth parents. At this time there is no law in place in Missouri that makes this type of agreement binding. An adoptive parent can agree to exchange information but if they decide at some point, not to there is no recourse for the birth parent.

Closed: Under this scenario, the birth parent and adoptive parent never meet, they don’t know names, locations etc. There is no exchange of information or pictures of the child.

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