At some point, most of us will have to deal with administering the Estate of a loved one who has passed away. You should know that Arizona Probate law is undergoing a significant change. Earlier this year, the Arizona legislature passed an amendment to Arizona Revised Statutes § 14-3971 that increases the value of a decedent’s assets that can pass to the beneficiaries via a Small Estate Affidavit. While there are definite positive aspects of this change, please read to the end for a real-life fraud scenario that happened to 3 people I know… It’s worth the time. What is a Small Estate Affidavit? In Arizona, and many other states, assets belonging to a decedent (a person who died) can pass to their heirs with a simple written and notarized Affidavit, provided the value of those assets did not exceed a certain amount and the required waiting times were met. This process allowed a grieving family to distribute the personal property and the real property without having to open Probate. Personal property transfer: The value of all personal property cannot exceed $75,000 Includes: vehicles, jewelry, furniture, household belongings, and money in any form – bank accounts, investment accounts, stock ownership, etc. Cannot use an Affidavit until 30 days after decedent’s death Real property transfer: The value of all real property cannot exceed $100,000 Includes: homes, buildings, and land Cannot use an Affidavit until 6 months after decedent’s death If the Estate contains both personal and real property, the Affiant (the person who signs and uses the Affidavit) must meet the longer time frame. Distributing property with value in excess of those limits would require Probate, as would distributing property in a state other than Arizona. What changed in the law? With the recent change, personal property with value of $200,000 or less, and real property with value of $300,000 or less, can now pass via Small Estate Affidavit. The same waiting periods apply. How does it work? If you are a legitimate heir of a person who has passed away, you may serve as the Affiant. You would then present that Affidavit to any banks or financial institutions, title companies, and other institutions holding property of the decedent, for them to transfer that property according to a Last Will and Testament or Arizona’s intestacy laws (which determine the order of priority of the decedent’s relatives for receiving the property) if there is no Will. So while the “good” is that you, as an heir of an Estate, can avoid formal Probate, save time and legal costs, and transfer assets more efficiently using a Small Estate Affidavit, there are negatives and risks. What are the negatives? Multiple Heirs – The Affiant must represent on the Affidavit that they are the sole heir of the Estate. The Affiant could be personally liable to other rightful heirs or creditors if they do not distribute the assets properly or have the other heirs assign their own rights to the Affiant. Incorrect valuation of property – If the Affiant has valued the personal and real property too low, then the use of the Small Estate Affidavit could be improper. This would open up the possibility of litigation by other people who believe they have a claim to the property. Transferring Real Property – It’s possible that a lender or title company will not accept the Small Estate Affidavit as being a legitimate tool for transferring real estate. Additional documentation may be required, and possibly Probate, if an Affiant attempts to sell or refinance the decedent’s property. And the risks? Look out for fraud! Yes, there are fraudsters out there, looking to steal the property of rightful heirs. Since a Small Estate Affidavit cannot be used on real property until 6 months after the death of the decedent, the heirs must be vigilant in ensuring that no other person attempts to transfer title before the heirs have done so. Now, with the ability to transfer real estate valued at up to $300,000 via Affidavit (rather than the previous value of $100,000), these bad actors have an even greater incentive to attempt to illegally transfer the Estate’s property to themselves. How could this fraud occur? Many people assume that if a spouse or parent dies, that person’s personal and real property will automatically become their own, as the surviving spouse or child. That’s not true . But because there are so many myths about Probate – it’s expensive, time-consuming, avoid it at all costs - they don’t do anything to legally transfer the property, especially real estate. A home remains in the decedent’s name even if the heirs are living in it and paying the bills and the mortgage. Well, a fraudster may read about a person’s death in an obituary or some other source, and take matters into their own hands. According to Arizona law, a legitimate creditor of the decedent, someone to whom the decedent owed money, may open Probate and petition the Court to be named the Personal Representative. A fraudster’s Court filings are likely fraudulent, but if none of the rightful heirs are watching, and they don’t know about or file any objection to the fraudster’s petition, the Court might approve it, giving the fraudster significant legal authority over the decedent’s property. True Stories! I have personally listened to the stories of 3 people to whom this has happened. Once named as the Estate’s Personal Representative, a fraudster deeded the decedent’s home to themselves and evicted the decedent’s heir – two were elderly spouses of the decedent who had lived in the home for decades, the other was an adult child of the decedent who had lived in the home for nearly a decade after the parent passed and had paid the mortgage, bills, and improvements. In one case, the home had been subsequently sold several times and the current owner was completely innocent of any wrongdoing. None of these victims had opened Probate or taken any steps to legally transfer the real estate after their family member’s death. And while the transfer of these homes by the fraudster to themselves was illegal, the victims’ only option was to file a civil lawsuit and fight the transfer in Court – a process that could take years and thousands of dollars. And there’s no guarantee that they would win. It’s heartbreaking. The Truth about Probate Probate is the legal process of transferring the decedent’s property to his or her rightful heirs, whether they are named in a Last Will and Testament or determined by Arizona’s intestacy laws. Under NO circumstance will the Courts or the state take the decedent’s property. It belongs to the heirs, and if the heirs do not come forward or cannot be found, then it will be considered unclaimed property, and sit in limbo until a rightful heir makes a claim. According to Arizona statute, Probate can be opened 120 hours, or 5 days, after a person’s death. Probate requires disclosure to the Court of all rightful heirs and all assets of the Estate, and requires written notice to all heirs and creditors that Probate is being opened. Every step is disclosed to the people who have the right to be notified. Yes, there is a fee to file the Application to be named as the Personal Representative. Yes, you may want to seek the help of an attorney, which will involve additional fees. Yes, the Probate process takes time, at minimum 4 months. But yes, an attorney can also move the process along more efficiently because they know what to do. A title company will only transfer a decedent’s real estate in a transaction approved by a Court-appointed Personal Representative. Please make sure that person is YOU. Bottom line: moving quickly to open Probate can provide a strong defense to any possible fraudulent actions that might take place. What to do? If there is a death in your family, please contact the Law Office of Wendy Anderson as soon as possible, at least to have a discussion about how to administer the Estate. It may be that using a Small Estate Affidavit is the preferred method, for all of the good reasons listed above. But it is possible that opening Probate could be the safer method in the long run and well worth the additional time and expense. Please give me a call or schedule an appointment and we can talk about your situation and the best process for transferring the Estate property to the heirs. NOTE: THIS ARTICLE IS FOR GENERAL INFORMATIONAL PURPOSES. IT DOES NOT CONSTITUTE LEGAL ADVICE, NOR DOES IT CREATE AN ATTORNEY-CLIENT RELATIONSHIP. EACH SITUATION IS DIFFERENT. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE YOUR LEGAL RIGHTS, REMEDIES, AND DUTIES. By Wendy M. Anderson, Esq. Law Office of Wendy Anderson, PLLC 480-825-4509 Contact Me Today

On December 3, 2024, a federal district court in Texas issued a nationwide preliminary injunction, pausing the enforcement of Beneficial Owner Information (BOI) reporting requirements under the Corporate Transparency Act (CTA). At this time the impact of the court’s ruling is to likely delay the requirement that all Reporting Companies file their BOI with FinCEN by January 1, 2025. It’s important to note that this injunction is not a final decision in the Texas court case, and that the ruling is just a single lower court’s opinion about the possibility that the final decision may be that the federal law is eventually invalidated. The preliminary injunction means the actual case is still pending, and a final decision will be rendered only after the case is fully reviewed. If this Texas court does issue a final ruling to invalidate the CTA, there are likely to be appeals filed in higher courts, with the possible results that the injunction is either affirmed or overturned, or restricted in some way. What should business owners do now? Until there is a final decision regarding the validity of the CTA, and there are no further appeals available, business owners should assume that the reporting requirements will be reinstituted in the future with a later filing deadline. If you have not already filed your BOI report, please continue to prepare to file it by identifying your company’s Beneficial Owners and organizing the required ownership data. For your Reporting Company, if it does not fit into an exception, the information required is: Full legal name of the reporting company (and any trade names or DBAs); Tax identification number; Jurisdiction of formation; and Current U.S. address. For each Beneficial Owner (as any individual who either (i) directly or indirectly exercises substantial control over an entity, or (ii) owns or controls at least 25% of the ownership interest in the company) and each Company Applicant (the person who forms the business entity or directs the filing), the required information is: Name, date of birth, and street address; Government-issued identifying document, such as a passport or driver’s license, and an image of that document. As there are developments in this case and in any other cases regarding the CTA, I will keep you informed. You can also read prior articles on my website. As always, please call with questions. NOTE: THIS ARTICLE IS FOR GENERAL INFORMATIONAL PURPOSES. IT DOES NOT CONSTITUTE LEGAL ADVICE, NOR DOES IT CREATE AN ATTORNEY-CLIENT RELATIONSHIP. EACH SITUATION IS DIFFERENT. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE YOUR LEGAL RIGHTS, REMEDIES, AND DUTIES. By Wendy M. Anderson, Esq. Law Office of Wendy Anderson, PLLC 480-825-4509 Contact Me Today

UPDATE 8-22-24 - Federal Rule Invalidated

You may have read the news on April 23 that the FTC issued a final rule banning all non-competition agreements on a federal level. The reasoning is that the FTC views a non-compete as an unfair method of competition, having the result of suppressing worker wages, reducing worker mobility, hindering innovation and entrepreneurship, and harming fair competition in the labor market. Key components The rule is scheduled to go into effect on September 4, 2024 ….but business owners need to be aware of the key components now: A non-compete is defined as a post-employment restriction that: o prohibits a worker from seeking or accepting work with a competitive employer; o prohibits a worker from starting a competitive business; or o penalizes a worker by making a payment to the worker, such as a severance, contingent on non-competition. The rule bans nearly all non-competes that apply after a worker has ended employment, regardless of whether the worker resigned or was terminated by the employer. The rule applies to nearly all employees AND independent contractors. The length of the existing non-compete is irrelevant – any restriction will be prohibited. The rule bans future non-competes and renders existing non-competes unenforceable. A requirement that a worker re-pay the employer for training costs might be prohibited under the rule. The rule does not affect an employee’s legal obligation to refrain from competitive activity while still employed. The rule supersedes any individual state’s non-compete law unless that state law is more restrictive. o In Arizona, the law governing non-competes is NOT more restrictive, so this rule would apply. Written Notice Required The new rule is retroactive and requires that an employer provide written notice to every employee or independent contractor with whom the employer has a non-compete agreement that the non-compete is no longer enforceable. This notice must be given BEFORE the rule is effective. Please call if you’d like assistance with this. Exceptions There are several exceptions to the rule: In the bona fide sale of a business, it is still permissible to restrict the Seller from competing against the Buyer for an agreed upon length of time and geographic area. For senior-level executives earning total compensation of at least $151,164 and who are in policy-making roles, non-competes signed before the rule takes effect will be enforceable. A franchisor’s non-compete agreement with a franchisee is still enforceable (since a franchisee is not a “worker”). What Protections Remain? Without the protection of a non-compete agreement to keep your departing workers from competing against your company, there are still protections you can put into place now. Employers are not restricted from seeking non-solicitation agreements, pertaining to their employees and their customers, with their workers. Confidentiality provisions, related to the employer’s confidential information and trade secrets, are fully enforceable as a departing worker does not have the right to disclose this information, whether or not their future employer is considered competitive. Additionally, an arrangement known as “garden leave” is not prohibited. Garden leave is a post-employment arrangement where the worker’s job duties may be significantly or entirely curtailed but she continues to receive salary and benefits for the period of time she is prohibited from taking a competitive role. Immediate Legal Challenges The US Chamber of Commerce immediately challenged the rule by filing a lawsuit in the U.S. District Court for the Eastern District of Texas arguing that the FTC does not have legal authority to issue binding regulations that prohibit unfair methods of competition. Other challengers claim that the rule is unconstitutional, arbitrary, and capricious. The possible outcomes of these lawsuits could be that the rule is declared invalid entirely, perhaps declared invalid as to the plaintiffs in those cases only, or declared valid and enforceable as of September 4 or another date. What Should an Employer Do? While any legal challenges remain, it is unclear if the rule will become effective on September 4, 2024 or if it will be invalidated. It is also unclear if any rule that does eventually take effect will be modified from this current rule. Watch for news about this and act accordingly. If it appears that the rule will become effective, any company with current non-competes will have to immediately provide written notice of unenforceability. Please give me a call if you’d like assistance with any of the following: Reviewing and modifying current employment or contractor agreements Adding to or amending your non-solicitation provisions as they relate to your customers and your workers Enhancing the protection afforded by non-disclosure obligations for confidential and trade secret information Considering an alternative restriction, such as garden leave, for departing workers in key roles Determining if one of the exceptions applies to your situation Drafting the required written notice that all existing non-competes are unenforceable So…are non-competes really banned? Perhaps. Read my articles for future updates. NOTE: THIS ARTICLE IS FOR GENERAL INFORMATIONAL PURPOSES. IT DOES NOT CONSTITUTE LEGAL ADVICE, NOR DOES IT CREATE AN ATTORNEY-CLIENT RELATIONSHIP. EACH SITUATION IS DIFFERENT. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE YOUR LEGAL RIGHTS, REMEDIES, AND DUTIES. By Wendy M. Anderson, Esq. Law Office of Wendy Anderson, PLLC 480-825-4509 Contact Me Today

Thank you to my friend, Wendy McClellan of Structure for Success, for allowing me to reprint this article. Because of the recent Department of Labor ruling regarding the FLSA, I have been asking my clients the same questions repeatedly. Do you have employees who are currently on salary? Is their salary less than $58,656 annually? What are their job duties and title? Do you know about the new DOL (Department of Labor) Overtime ruling? What new ruling you ask? On April 23, the DOL ruled that Fair Labor Standard Act (FLSA) required an increase in the annual salary-level threshold determining a worker's eligibility for overtime pay by 23.4%. If you are reading this and saying “Huh?” Or if you have no clue if this applies to you. Or if you want to understand the changes you need to make with your workforce – keep reading. I am going to try and simplify it as much as I can. Remember this is only a brief summary. If you have questions, please reach out directly. Who needs to comply? The FLSA regulates essentially every employer which means every business owner with at least one employee must comply with the changes. What are the changes? Effective July 1, 2024, workers who earn less than $43,888 (the minimum salary requirement) will need their employment status classified as a non-exempt employee, which means that they are eligible for overtime pay. Effective January 1, 2025, workers who earn less than $58,656 (the minimum salary requirement) will need their employment status classified as a non-exempt employee and are eligible for overtime. The next update will take place on July 1, 2027, and the salary threshold will increase again at that time. Things to consider: Many employers think because they pay their employee on salary, the employee is exempt or ineligible for overtime pay. That is not accurate. You can continue to pay your employees a salary provided they are reclassified as non-exempt and they receive overtime pay for any workweek in which they work more than 40 hours. Simply raising your worker’s salary to the new limit will not necessarily meet the classification requirements. Simply changing the employee's title to "manager" or "supervisor" will not meet the new classification requirements. What do I mean by that? In addition to meeting the minimum salary requirement, a position must meet certain “specific duties tests” in order to be exempt from the overtime pay requirement. There are DOL websites where you can run the duties through and see if they qualify for an exception. Here are the two most common; there are other exceptions. Executives: These workers do not qualify for overtime pay if they meet the above minimum salary AND: their primary duty is “managing the enterprise or managing a customarily recognized department,” and they regularly direct the work of at least 2 or more other full-time employees, and they have the authority to hire or fire other employees. Administrative Workers: These workers do not qualify for overtime pay if they meet the above minimum salary AND: their primary duty is “the performance of office or nonmanual work directly related to the management or general business operations,” and their primary duty includes “independent judgment with respect to matters of significance.” Certain Positions are NOT eligible for salary or exemptions from the new overtime rule. If you are currently paying these employees on salary, you will need to reclassify them to hourly workers by July 1 st and they will also qualify for overtime pay. Blue collar workers or manual laborers. These employees perform work involving “repetitive operations with their hands, physical skill and energy.” Inside sales employees Paralegals and legal assistants Most administrative assistants Almost certainly there will be legal challenges to this DOL ruling, but that doesn’t mean you shouldn’t comply. This is not a “let’s wait and see” situation. If you do not comply with the new requirements, be prepared to pay hefty penalties. It isn’t worth jeopardizing your business. I recommend you begin these changes sooner rather than later and be ahead of the game. Structure for Success is happy to help you with assessing your workforce. Please reach out and let’s see how we can help. Structure for Success is a full-service Human Resources, Business Development, and Strategy consulting firm. Schedule a no-charge Discovery Call with Wendy McClellan at www.structure4success.com . NOTE: THIS ARTICLE IS FOR GENERAL INFORMATIONAL PURPOSES. IT DOES NOT CONSTITUTE LEGAL ADVICE, NOR DOES IT CREATE AN ATTORNEY-CLIENT RELATIONSHIP. EACH SITUATION IS DIFFERENT. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE YOUR LEGAL RIGHTS, REMEDIES, AND DUTIES. By Wendy M. Anderson, Esq. Law Office of Wendy Anderson, PLLC 480-825-4509 Contact Me Today

You may have read in the news recently that the new federal law, the Corporate Transparency Act, has been held unconstitutional. Well, yes. By a federal judge in Alabama. This new law became effective on January 1, 2024 and applies to the majority of small businesses and their owners in the United States. If you are unaware of this, please read my blog articles here . The Corporate Transparency Act The law requires most small businesses (there are some exceptions) to register with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) by providing information about the business entity, its Beneficial Owners, and its Company Applicants. A Beneficial Owner is someone who either (i) owns 25% or more of the entity’s stock or interests or (ii) has substantial control over the entity, as defined by the law. A Company Applicant is the person who files the documentation to form the business entity with - in Arizona - the Arizona Corporation Commission or the Secretary of State. The information required to be filed for a Beneficial Owner or Company Applicant includes their name, address, birthdate, and a photo of their driver license or passport. The Lawsuit Last month, a business owner in Alabama, in conjunction with the National Small Business Association, filed suit against the U.S. Treasury Department in the United States District Court for the Northern District of Alabama. In National Small Business United, et al., v. Yellen, et al., the plaintiffs argued that the CTA’s mandatory disclosure requirements exceed Congress’ authority under Article I of the Constitution and violate the First, Fourth, Fifth, Ninth, and Tenth Amendments. In response, the Treasury Department argued that the law falls within the Commerce, Taxing, and Necessary and Proper Clauses, along with Congress’ foreign affairs and national security powers. The Ruling The Court ruled that the CTA is unconstitutional for exceeding the Constitution’s limits on Congress’ enumerated powers, without addressing any potential violations of the Amendments. Importantly, the ruling applies only to the Alabama plaintiffs in this case and the CTA remains effective and enforceable in all other states unless and until further legal action changes that. What it Means for Arizona Businesses For businesses in Arizona, until there is a nationwide ruling, I strongly recommend compliance with the CTA’s deadlines: Businesses registered with the Arizona Corporation Commission or Secretary of State prior to January 1, 2024 must register its Beneficial Owner Information reports by December 31, 2024. No need to file early, mark your calendar for 4th quarter. Businesses registered between January 1, 2024 and December 31, 2024 must file with FinCEN within 90 days of formation. If your entity was formed in January, that deadline is fast approaching for you. Businesses that register on or after January 1, 2025 must file within 30 days of formation. If you have any questions about the provisions of the CTA or how to determine your entity’s Beneficial Owners and Company Applicants, just give me a call and let’s get together to discuss. NOTE: THIS ARTICLE IS FOR GENERAL INFORMATIONAL PURPOSES. IT DOES NOT CONSTITUTE LEGAL ADVICE, NOR DOES IT CREATE AN ATTORNEY-CLIENT RELATIONSHIP. EACH SITUATION IS DIFFERENT. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE YOUR LEGAL RIGHTS, REMEDIES, AND DUTIES. By Wendy M. Anderson, Esq. Law Office of Wendy Anderson, PLLC 480-825-4509 Contact Me Today

In Arizona, any business owner can form a new corporation or limited liability company (LLC). This blog will identify the decisions you need to make and outline the steps required to form a for-profit entity with the Arizona Corporation Commission (ACC). If you are looking to form a nonprofit entity, please contact the Law Office to discuss before completing any online formation. Initial decisions to make before you file 1. Check for name availability. Before you begin, make sure that the name you want for your new entity is available. Click here to enter your desired name and click “Name Availability Check” at the bottom of the page. ACC Name Availability 2. Decide if you want to form a corporation or LLC. (Advice on this question is beyond the scope of this blog.) Other entity forms, such as different types of partnerships, can also be formed through the ACC. 3. Determine who your owners, officers, or directors are. These people will most likely be considered Beneficial Owners of your entity, under the Corporate Transparency Act. (See other blogs on the Law Office website for information on this new Federal law.) a. For a corporation, you must name at least one director, and you can name any officers you have already appointed. b. For an LLC, you must decide what form you will have: i. For Member-Managed, you must name at least one member. ii. For Manager-Managed, you must name at least one manager. You can name the Members if you choose. 4. Determine who will serve as the Statutory Agent. The purpose of a Statutory Agent is to accept service of process if your entity is named in a lawsuit. The Statutory Agent’s address must be listed on the ACC website, and cannot be a P.O. Box, because a process server must be able to serve the Statutory Agent in person. An officer, director, member or manager, in their individual capacity, or any person over 18 with a physical address in Arizona can serve as the Statutory Agent, or you can hire a third-party or different entity to fulfill this role. The Statutory Agent does not have any actual liability for the lawsuit; their role is simply to accept the papers and transmit them to the entity representative. 5. Determine what addresses you will use. Remember that all information you enter on the ACC website is public. You can use your home address, if you want. If you have an office address that is already public, you can use that. But if you want to keep your office and/or home address private, you will need to get an Arizona P.O. Box to use for your entity’s address and for your address. If you take this route, you will need to have someone else serve as the entity’s Statutory Agent, so that you can file the Statutory Agent’s public physical address with the ACC. 6. Decide who will do the entity formation. For an LLC, you have an Organizer; for a corporation, you have an Incorporator. This person can be an officer, director, member or manager, or any outside third party. This person will be considered the Company Applicant when your entity files its Beneficial Owner Information pursuant to the Corporate Transparency Act. 7. And for a corporation only…. a. You will determine how many shares and what class of shares you will authorize. After the entity is formed, you will separately issue shares to shareholders. b. Additionally, as part of the online filing, you will be required to complete a Certificate of Disclosure for all directors and officers that are listed in your filing. Click here to see the questions that you will need to answer online. Certificate of Disclosure Filing with the ACC 8. First, create an ACC account. Once you have your entity’s name selected, click here to create an online account so that you can use the ACC website to form and maintain your entity. ACC Registration 9. Form your entity. Once you are logged in, and are on the “My Dashboard” page, click “Online Services,” then “Start a New Business.” You can click “Frequent User” and the wizard will present the forms for entering the information regarding the controlling persons and the Statutory Agent and their addresses. If you would like the ACC system to walk you through the steps, click on “Guide Me.” 10. Pay for the filing. After approving the information, follow the prompts to pay for the online formation. 11. Statutory Agent Acceptance. Your named Statutory Agent will immediately receive an email from the ACC to accept the appointment. They must accept within 7 days or the entity’s filing will be rejected. How can the Law Office of Wendy Anderson help? Serve as your entity’s Statutory Agent. Provide counsel regarding what type of entity might best fulfill your business objectives. Provide counsel regarding your obligations for reporting pursuant to the Corporate Transparency Act and assist in identifying your Beneficial Owners. Provide information in the form of articles on the firm’s website to explain the Corporate Transparency Act and your obligations as an officer, director, member or manager of an Arizona entity. After your entity is formed, the firm can assist with changes to the information and in filing amendments or annual reports with the ACC. The firm does not serve as an Organizer or Incorporator when initially forming your entity and does not assist in the online formation process. Please understand that the above does not constitute legal advice and there is no attorney-client relationship created when you read this article or if you follow the steps herein; this is only information regarding how to form a new Arizona entity yourself. Once your entity is approved by the ACC, the Law Office would be happy to assist with any other legal business or employment questions or matters that arise. Just give a call or schedule an appointment ! NOTE: THIS ARTICLE IS FOR GENERAL INFORMATIONAL PURPOSES. IT DOES NOT CONSTITUTE LEGAL ADVICE, NOR DOES IT CREATE AN ATTORNEY-CLIENT RELATIONSHIP. EACH SITUATION IS DIFFERENT. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE YOUR LEGAL RIGHTS, REMEDIES, AND DUTIES. By Wendy M. Anderson, Esq. Law Office of Wendy Anderson, PLLC 480-825-4509  Contact Me Today

As you may know, the Corporate Transparency Act (CTA) is just around the corner – it becomes effective on January 1, 2024. Prior blogs on my website explain the details of this new federal law and what information - pertaining to all Reporting Companies, Beneficial Owners, and Company Applicants - is required to be reported to FinCEN in 2024. But collecting and reporting the information is just part of what should be done by company owners and officers. Because business entities that are subject to this federal law will have ongoing obligations, it would be prudent to review and update your company’s governing documents and agreements to ensure that certain individuals who are classified as Beneficial Owners contractually agree to provide the required personal information and updates to the company (or directly to FinCEN) so that the company can fulfill its mandatory reporting obligations. Some steps to consider: Build CTA and Beneficial Owner Information Reporting compliance into governing documents. Newly created entities often draft and adopt governing documents, like operating agreements, bylaws, shareholder or subscription agreements. You should consider adding a provision that imposes an express obligation on any person that could be classified as a Beneficial Owner - LLC members, corporate shareholders, officers, general managers and others with significant control or ownership – to provide and update the personal information that the company must submit in its Beneficial Owner Information (BOI) forms. Additionally, consider adding representations and warranties regarding this obligation in your agreements and remedies for any breaches. And, the company may want to secure indemnification from its Beneficial Owners for any penalties assessed due to a Beneficial Owner’s failure to provide accurate or timely information or updates. Update Employment Agreements for executive level employees. A high-level executive will likely have substantial control over the entity’s decisions and, therefore, is considered a Beneficial Owner, even if they have no actual ownership stake in the company. Executive employment agreements should be amended to include required reporting and updating of BOI during the term of the employment. Include BOI requirements in entity purchase/sale agreements. If you are selling your ownership interest in your entity, whether it’s an LLC Membership Interest or a certain number of corporate shares, it is important to include a post-closing provision that requires the entity or the new owner to update the Reporting Company information and BOI – since it will no longer include you! Create a plan for filing, updating or correcting Beneficial Owner Information. Reporting Companies will have only 30 days to update or correct Reporting Company and BOI information - whether a name or address change, or issuance of a new form of identification that must be uploaded. Accordingly, companies should implement a process to monitor and track any changes in information among their Beneficial Owners so that an updated report can be timely filed, avoiding any penalties. Each Reporting Company will have to decide who will actually file the reports with FinCEN – will it be a company employee or a third-party facilitator? If the company will be filing its own reports, there must be a secure storage process for each Beneficial Owner’s personal information so that it is safe from a data breach. Appoint a Compliance Officer. Companies that own numerous other entities or that have a number of Beneficial Owners should consider appointing a control person to standardize and simplify the process of providing BOI for the initial report and any subsequent updates. Perhaps this compliance officer can be the person doing the actual filing or can be the company’s liaison to an outside facilitator. Consider requiring all Beneficial Owners to obtain a FinCEN Identifier. If your company requires its Beneficial Owners to obtain a FinCEN Identifier, then the individual will be responsible for ensuring their information is always up to date, rather than the Reporting Company being responsible for that. This will also ease the burden of safely securing a Beneficial Owner’s personal information, as the company will not be handling that information. Next steps. Take some time to think about how your company will be affected by the Corporate Transparency Act. If you’d like some guidance in how to ensure that your company and its Beneficial Owners are compliant, don’t hesitate to contact me and schedule a call or meeting. NOTE: THIS ARTICLE IS FOR GENERAL INFORMATIONAL PURPOSES. IT DOES NOT CONSTITUTE LEGAL ADVICE, NOR DOES IT CREATE AN ATTORNEY-CLIENT RELATIONSHIP. EACH SITUATION IS DIFFERENT. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE YOUR LEGAL RIGHTS, REMEDIES, AND DUTIES. By Wendy M. Anderson, Esq. Law Office of Wendy Anderson, PLLC 480-825-4509  Contact Me Today

The federal Corporate Transparency Act (CTA) will be in effect as of January 1, 2024. More than 32 million registered businesses in the U.S. will be subject to this law. If yours is one of them, continue reading to discover what you need to do. If you’ve not seen previous posts or articles, the purpose of this new regulation is to combat money laundering, human and drug trafficking, terrorism financing and other illegal activities by requiring business entities to disclose information about the individuals who beneficially own and control them to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). As a business owner, here are your next steps: 1. Determine whether your company qualifies as a Reporting Company. Any corporation, limited liability company, or similar entity which is created by filing with a secretary of state (or similar office, such as the Arizona Corporation Commission) or is formed in a foreign country and registered to do business in the United States is considered a Reporting Company. A Reporting Company will have to submit the following information: Full legal name of the reporting company (and any trade names or DBAs); Tax identification number; Jurisdiction of formation; and Current U.S. address. 2. Determine if an exemption applies. Certain entities are exempt from filing: Companies (i) employing more than 20 full-time employees in the United States, (ii) operating from a physical office in the United States, AND (iii) having more than $5 million in gross receipts/sales, as shown on its most recent tax return Federally registered entities such as banks, credit unions, investment advisors, securities broker dealers, insurance companies, accounting firms, and public utilities Tax-exempt entities if registered with the IRS Publicly traded companies that are subject to SEC regulations Additional exceptions apply to certain entities, such as trusts, that do not require the filing with a government agency 3. Determine the Company’s Beneficial Owners. A Beneficial Owner is defined as any individual who either (i) directly or indirectly exercises substantial control over an entity, or (ii) owns or controls at least 25% of the ownership interest in the company. Substantial Control can include individuals who are senior officers, those who have authority over the appointment of officers or board members, or those who have significant influence over important decisions and matters affecting the Reporting Company. Ownership Interest can include shares or membership interests, or any other documentation that establishes a level of ownership in the entity. If your entity was created many years ago, it’s likely that there have been changes to the owner’s names and addresses, and possibly some ownership interests have changed hands through sales or inheritance. Start now to identify the current Beneficial Owners and collect the information listed below. 4. If your entity is created in 2024 or later, determine the Company Applicant. This is the person who files the document that forms the entity and/or the person who directs or controls the filing of the document. This can be an individual at your company, at your attorney or accountant’s office, or a third-party registration company. 5. Obtain information on Beneficial Owners (and Company Applicants, if applicable). For each Beneficial Owner or Company Applicant, the following information must be reported: Name, date of birth, and street address; and Government-issued identifying document, such as a passport or driver’s license and an image of that document 6. Apply for FinCEN identifiers when possible. A FinCEN identifier allows a Beneficial Owner or Company Applicant to enter their information directly with FinCEN, rather than providing their personal information to the Reporting Company. If the Reporting Company collects this information, it will be responsible for safeguarding the information and for updating it with FinCEN when there are changes. If the individual applies for a FinCEN identifier, the individual will be responsible for any updates and the Company does not have to create any process for securing the information. 7. Submit Initial Filing on or after January 1, 2024. The Beneficial Owner Secure System (BOSS) will be available on January 1, 2024 for Reporting Companies to complete their Beneficial Owner Information (BOI) reports. If your company was formed before this date, you have until December 31, 2024 to file your BOI report. If your company is formed in 2024, you have 90 days from the date of formation to file your BOI reports. If your company is formed on or after January 1, 2025, you have 30 days from the date of formation to file your BOI reports. The BOI report will likely not be available to you after submission, so be sure to save your filing as a PDF so that you can reference the information later. 8. Submit Updated Filings. If any of the information previously reported to FinCEN changes, the Reporting Company has 30 days to file an updated report. If the Reporting Company submitted inaccurate information, a corrected report must be filed within 30 days of the date it knew, or should have known, that the information was inaccurate. Beware of Penalties. It is unlawful for any person to willfully provide, or attempt to provide, false or fraudulent BOI, or to willfully fail to report complete or updated BOI. Such willful actions constitute federal crimes subject to civil and criminal prosecution, including civil fines of up to $500 per day and criminal penalties of a $10,000 fine and imprisonment up to two years. Final Thoughts. These obligations are new to many business owners in the U.S. Take the time now to review the required steps, to determine who your company’s Beneficial Owners are, and to make a plan for obtaining the needed information. The CTA forms are not yet available, so work now to address any issues prior to January 1, 2024 so that you can timely file your BOI report. Please contact me if I can be of assistance. NOTE: THIS ARTICLE IS FOR GENERAL INFORMATIONAL PURPOSES. IT DOES NOT CONSTITUTE LEGAL ADVICE, NOR DOES IT CREATE AN ATTORNEY-CLIENT RELATIONSHIP. EACH SITUATION IS DIFFERENT. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE YOUR LEGAL RIGHTS, REMEDIES, AND DUTIES. By Wendy M. Anderson, Esq. Law Office of Wendy Anderson, PLLC 480-825-4509 Contact Me Today