It used to be that individuals would go online themselves with the appropriate Secretary of State office and submit a filing for their own, new entity, whether a corporation, LLC, etc., or they would engage the services of a company or maybe their attorney or accountant. I predict that those days are going to radically change now that the Corporate Transparency Act (CTA) is here with the significant responsibilities and potential penalties being assessed on the person who actually goes online to submit the information to establish a new entity with a Secretary of State office or tribal authority.
This is causing me to evaluate which clients I will continue to do these things for and which clients I will have to say “no” to. The CTA places a significant responsibility on the applicant to verify the accuracy and authenticity of the information being used to file a new entity, be it an LLC or corporation. Once again, the federal government has turned a private, ordinary citizen into an adjunct member of their aggressive, overreaching law enforcement activity.
The burden of determining what “substantial control” is given the vague and broad language used in the statute, and the uncertainties of the ever-changing rules and regulations, have caused certain advisory groups for accountants to say that accountants should not be doing this as a service to their clients going forward. I tend to agree. I anticipate that in the near future, and probably for some time to come, those who are very careful about their craft are going to insist that any new LLC be established by either the actual owners themselves or by an actual lawyer (not a paralegal) advising or representing the owners and/or the new entity.
Is there an extra burden on me and my office for doing this for existing clients? Yes, there is. Does that mean my prices have to go up? Absolutely. The time required to establish an entity now is probably four (4) to six (6) times greater given all the burdens of complying with the FinCen website.
In my next article, I will talk about one of the solutions to the CTA conundrum that now presents itself to many real estate investors who desire to have privacy as to what they own and with whom they are doing business.