Businessman shows concept hologram Transparency on his hand to symbolize the Corporate Transparency ActLast month’s post explained how setting up a dummy company can help seal a deal. Unfortunately, dummy companies can be used for far more nefarious purposes, including money laundering, terrorism financing, and tax fraud. For example, the New York Times and 60 Minutes revealed how high-end real estate has been snatched up by dummy companies linked to foreigners with ties to organized crime, despotic regimes, or both.

They were able to use dummy companies to anonymously move money into the United States, because most States do not require organizers of corporations or LLCs to disclose their true owners. That’s the case in Texas. The certificate of formation for a Texas corporation must identify its initial directors but not its shareholders. And the organizer of a Texas LLC can conceal its members by setting the company up as a manager-managed LLC and then appointing a non-member as the manager. While the ability to conceal the company’s owners is good for a buyer seeking to obtain a lower price or discourage competitive bidding, it presents a significant challenge for law enforcement and intelligence agencies.

To combat the illicit use of dummy companies, Congress enacted the Corporate Transparency Act. It was tucked away in the National Defense Authorization Act, which became law on January 1, 2021, when Congress overrode President Trump’s veto.

The Corporate Transparency Act generally requires corporations, LLCs and other similar entities to file reports on their beneficial ownership with the Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury beginning next year. While the Corporate Transparency Act was aimed at malign actors using dummy companies, its obligations, like the rain, fall on the just and unjust alike. Millions of companies will have to file new reports on their beneficial ownership with the federal government, regardless of whether they are dummy companies or engaged in any illegal activity. While the scope of those reporting obligations are not clear yet, here’s what your company needs to know now:
Continue Reading The Corporate Transparency Act: What Your Company Needs to Know About the New Federal Reporting Requirements

Texas state flag waving in the wind

If you’re new to Texas, you’re not the first from California to sing about it. In their 1964 album, The Beach Boys sang about being a “Long Tall Texan.” Nowadays, there’s a lot more to moving to Texas than just singing a song. This is the first of a series addressing tips for moving the entirety of your business and you into the Lone Star State.

If you intend to continue to conduct business in your home state, you should strongly consider having two separate and distinct entities, books, employees and accounting systems. Generally speaking, it’s easier to start a business in Texas than it is to terminate your business ties in your departing state – together with the on-going payment of all of the departing state’s taxes and fees. You should strongly consider the following:


Continue Reading New to Texas? Considerations for Moving Your Business to the Lone Star State

an elderly person has mental problems. The President of First Bank of Buxboro Ernest “Big Daddy” Bux is growing older, and he’s showing it. Despite tightening bank regulations on lending and credit documentation, Big Daddy seems to be getting even more lax. Moreover, just last week – during important loan renewal negotiations with the Bank’s largest customer – Big Daddy could not remember the name of the company or the name of its principal. Do the directors of First State Bank owe any legal responsibility to the FDIC as the insurer? Do the Bank directors have any legal responsibilities to the Bank?  What about Big Daddy, personally, does he have rights?
Continue Reading Can your Company be Protected from the Risk of an “Unfit to Work” Partner?

Feedback online or review on computer laptop concept vector illustration, flat cartoon pc with voting hands thumbs gesture and reviews stars, idea of like or dislike symbolsIf your business provides consumer-oriented goods or services, your reputation is very important to you.  When I use the term “consumer-oriented,” I mean goods or services that are primarily used for personal or household purposes.  That is not to say that businesses that do not directly affect consumers are not worried about their reputations.  In fact, they are, because reputation means everything.

Suppose one of your customers claims one of your employees stole an item while they were at the customer’s home making repairs.  You interviewed all of the employees who were at the customer’s home.  None of them saw the item in question.  You speak to the homeowner, and discover that your employees were working in a completely different part of the house than where the homeowner keeps the item.  You looked in the company vehicles and do not see any evidence of the item.  The only thing supporting the customer’s claim is that the customer was not home at the time your employees were there.  The customer files a police report.  Your team cooperates, and the police do not find sufficient evidence to support any charges.  The customer is insistent that your employees took the item, and is threatening to sue.  What do you do?
Continue Reading Defining a Win in Litigation: Saving Reputational Costs

Last month, a gunman entered an El Paso Walmart, shot and killed 22 people and injured more than two dozen others. A local El Paso attorney filed suit against Walmart claiming that store had insufficient security. Besides the shooter “Malo,” is the retailer Walmart responsible? What about the property manager? The property owner? The architect who designed the retail store?
Continue Reading Mass Shootings – Who’s Responsible?

Struggling these last several months with the family dynamics and dilemmas of transitioning his family business to the next generation, Big Daddy Ernest Bux, 65, now turns to ordinary, practical considerations. What are Big Daddy’s businesses worth, and do they have sufficient value/cash flow to accomplish his plans? Will Big Daddy’s estate planning cover the estate taxes and transfer estate assets consistent with his plans and goals?

Continue Reading Family Matters: Can a Family Business Succeed Without Maximum Valuation and Sound Estate Planning?

Continuing to deliberate about when and how to exit from his family business, Big Daddy Ernest Bux, 65, considers yet another task on his checklist: Determine Exit Strategy. He’s already Identified Successors and Decision Makers, and Planned for Contingencies. Yet to be tackled are Establish Goals, Plan Entity Structure and Transfer, Complete Estate Planning, and Implement Document Maintenance and Control. Asking his banker last week about a new loan to expand his business, Big Daddy learned that his banker cannot give him a business loan without seeing a complete exit plan. How is an exit strategy different from last month’s thoughts on identifying successors?
Continue Reading Family Matters: Can a Family Business Succeed Without a Written Exit Plan?

Realizing that at 65 it’s time to talk about succession of his family business – especially Buxboro State Bank, Big Daddy Ernest Bux identified his checklist: Identify Successions, Identify Decision Makers, Plan for Contingencies, Establish Goals, Plan Entity Structure and Transfer, Complete Estate Planning,  Determine Exit Strategy, and Implement Document Maintenance and Control. To succeed, what does identifying successions and decision makers look like for Big Daddy’s family business?

Continue Reading Family Matters: Can a Family Business Succeed Without Identifying Successors?

Finishing a best-year-ever 2018 and being questioned daily by his second wife Anna Nicole about making her children officers and owners of the family business Buxboro State Bank, Big Daddy Ernest Bux concludes, at 65 years old, that it’s time to think about a family business succession plan. What should Big Daddy do? Is he likely to succeed?
Continue Reading How can a Family Business Succession Plan be Successful?

After several months of telling family and friends that his wedding venue business on Big Bux Ranch was for sale, Jeff Bux is contacted by his biggest competitor Hustler Plentee who also owns a wedding venue in the next town south of Buxboro. Hustler asks if Jeff will tote-the-note because his credit is maxed out at Buxboro State Bank, which is owned by Ernest “Big Daddy” Bux. Wanting to avoid a broker’s fee and an attorney’s time, and hoping that he might be able to get a job at the Bank, Jeff – uncharacteristically – asks his father for advice to help him sell it himself. Can Jeff sell his own business? If you were Big Daddy what would you say?
Continue Reading Should an Owner Finance the Buyer of Their Business?