Business Counseling

QUESTION 6: WHAT IS A 25% OR MORE OWNERSHIP INTEREST?A person who owns or controls 25% or more of the ownership interests of the reporting company is a beneficial owner. Any of the following may be an ownership interest in a reporting company:...

Clients often ask whether they should form their business entity in Delaware. Delaware is an ideal jurisdiction for public companies and private companies with venture capital and private equity investors. However, Delaware may not be ideal for a local business operating in New Jersey, New York, Pennsylvania, or Texas. For example, if a business is formed in Delaware, but will be operated in another state, the business will have to file papers and pay initial and likely annual fees in two states. For many clients, forming a business in New Jersey, New York, Pennsylvania or Texas is perfectly acceptable. This paper describes some of the advantages and disadvantages of forming a business entity in Delaware, and then outlines the initial and annual costs involved in forming a corporation or limited liability company in New Jersey, New York, Pennsylvania, Texas, and Delaware.There are some advantages of being a Delaware company, but they are probably not important to most small businesses operating in New Jersey, New York, Pennsylvania, or Texas. The advantages are:...

Despite legal challenges (see our advisory Nothing Has Changed with the Corporate Transparency Act), the Corporate Transparency Act (CTA) remains in effect and the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department continues to implement and enforce the CTA. As a result, companies in existence as of January 1, 2024 are required to file their beneficial ownership information (BOI) reports before January 1, 2025.The analysis for determining whether a company is reporting or exempt and identifying its beneficial owners (which is a misnomer since it is not limited to owners) can be challenging and time-consuming, especially for a company with a complex ownership structure. Inadequate or hasty reporting heightens the likelihood of mistakes, inaccurate data, and potential non-compliance, which can result in significant civil penalties of up to $500 per day and criminal penalties of up to $10,000 and imprisonment for up to 2 years. As a result, now is the time to actively prepare to file the BOI report by the deadline. A best practice is for the company to designate a person responsible to identify beneficial owners and gather the necessary information and documents to file the BOI report. For a comprehensive analysis of the CTA, see our client advisory (Understanding Your Obligations Under the Corporate Transparency Act).Incidentally, a company formed or registered in 2024 is required to file its BOI report within 90 days of formation or registration. So, if such a company has not yet done so, it should immediately file to avoid penalties. We can assist companies with their analysis of their reporting obligations under the CTA. If you have any questions about the Corporate Transparency Act, please contact Gianfranco Pietrafesa at gpietrafesa@archerlaw.com or 201-498-8559, Zhao Li at zli@archerlaw.com or 856-673-7140, or any member of Archer’s Business Counseling Group.DISCLAIMER: This client advisory is for general information purposes only. It does not constitute legal or tax advice, and may not be used and relied upon as a substitute for legal or tax advice regarding a specific issue or problem. Advice should be obtained from a qualified attorney or tax practitioner licensed to practice in the jurisdiction where that advice is sought. ...