Getting Ready for the Corporate Transparency Act: Prepare Now 

Elizabeth Q. Boehmcke Esq. On December 28, 2023

The Corporate Transparency Act (the “CTA”) requirements come into effect beginning on January 1, 2024 and the reporting compliance will touch millions of Americans.  Lawyers in many different practice areas, including estate planners and elder law attorneys, will find themselves needing to address the CTA with new, existing, and former clients who have a connection with a reporting company.  Will you and your firm be ready to deal with the challenges posed by the CTA and reap the rewards of increased confidence and trust of your clients?  If you are like many attorneys, you are aware of the CTA and its requirements but do not yet feel fully prepared to grapple with it in practice.  The exact approach you take in dealing with the CTA may vary depending on the size of your firm, your client base, and your capacity to take on additional work.  The following task list is suggested as a starting point to help you become better prepared. 

  1.  If you are not intimately familiar with the CTA, start by taking a deep dive into the law and the available resources.  Do this today.  If you are with a firm, do your part to ensure that the firm educates all attorneys and staff about the CTA, the necessity for timely reporting, and penalties for failing to timely file reports.  Resources for learning about the CTA are available in the InterActive Legal Attorney Resource Center for the Corporate Transparency Act here https://interactivelegal.com/attorney-resource-center-for-the-corporate-transparency-act/. 
  1. Develop a strategy for keeping up with FinCEN regulations and rules and updating or changing your approach to compliance accordingly.  Anticipate that there will be many changes, refinements and potentially new requirements over the next year or two as FinCEN releases additional guidance.  Larger firms may form (or may already have formed) a committee to keep up with these changes and set firm policy as to compliance. 
  1. Contact your malpractice carrier to determine whether they have any guidelines that you or your firm will need to follow when representing (or not representing clients) on CTA compliance matters.   
  1. Check with your state bar to see if ethics opinions concerning your duties in connection with the CTA have been issued.  For example, Maryland issued an opinion relating to the attorney’s duty to advise former clients regarding the CTA, in Ethics Docket No. 2023-03. 
  1. Determine how much CTA compliance work you or your firm are willing to do.   
  1. If you decide not to offer the full range of CTA compliance work for some or all of your clients,  seek out referrals of other attorneys, accountants, or service providers who are committing to do CTA compliance work.  Have at least a few referrals ready for clients who will need to comply with the CTA. 
  1. Review existing clients.  In each case, determine the extent of your ethical responsibility to notify and inform the client of the CTA and its potential impact on them. 
    • Look for entity clients who may themselves be reporting companies. 
    • Look for individual clients for whom reporting companies have been or will be formed.  This review should not be limited to active business companies but should also include individual clients who have created LLCs or limited partnerships to hold real property or other assets, either for liability protection or for estate planning purposes. 
    • Look for individual clients who have funded revocable or irrevocable trusts with interests in businesses that may be reporting companies. 
    • Look for clients who hold positions of authority as managers, officers, members of the Board of Directors or similar positions of authority over companies that may be reporting companies.   
  1. Determine whether you will notify former clients about the CTA.   
  1. Prepare a notice to clients (and possibly former clients) regarding the CTA.  Tailor the content of the notice to reflect your decisions about taking on, or not taking on, CTA compliance work.  Consider making multiple outreach attempts to document your efforts to meet any ethical obligations to notify clients of changes that may impact them. 
  1. Prepare new retainer letters for CTA compliance. 
    • To the extent that you are engaged in a matter that involves the creation of a new entity on or after January 1, 2024, specific mention of the CTA should be included in those engagement letters.  The engagement letter should be specific regarding the extent to which you are prepared to give advice on the CTA, whether you are willing to assist with identifying beneficial owners for purposes of CTA reporting, and whether you are willing to file the report with FinCEN.  You may also wish to specify whether you are willing to file formation paperwork with the state.  Careful consideration needs to be given as well as to the identity of the client – is it the entity or some other individual?  Consideration should also be given to limiting the engagement to the initial report so the Firm is not responsible for reporting changes in beneficial owners or in beneficial owners’ information. 
    • To the extent that the Firm will be doing CTA compliance work of some kind for existing clients who have a connection to a reporting company but are not forming a new one, engagement letters should discuss the tasks that will be necessary to determine whether a company of concern is a reporting company and who its beneficial owners are: information gathering and analysis of the company, its structure and management, and its business operations; review and analysis of trust agreements and other agreements related to owners of the company to determine whether any individual has sufficient interests in or powers over the owner (trust or other entity) to be considered a beneficial owner; and actual reporting. 
  1. Revise forms for entity creation to expressly state that managers and trustees have authority to act under the CTA to obtain the requisite information from beneficial owners.  These may include LLC Operating Agreements, limited partnership agreements, and trust agreements.  Consider including language limiting the liability of trustees, managers and others for gathering beneficial ownership information and for transmitting such information to reporting companies and to FinCEN.  Consider creating forms for use in amending existing operating agreements, limited partnership agreements and trust agreements (or decanting irrevocable trust agreements) to include provisions for the CTA. 
  1. Prepare model guidelines for reporting companies to use in creating their own policies for reporting under the CTA and monitoring beneficial owners for changes that must be reported.  Consider whether requiring each beneficial owner to obtain a FinCEN Identifier is a good plan. 
  1. Create checklists and tickler systems for CTA compliance based on the tasks that you decide to undertake for clients.  These are new requirements so it is important to be very specific about the tasks and timelines that must be met. 
  1. Revise client intake forms to ask specifically about interests in entities held individually or in trust, and whether clients serve  as a manager of any entities. 

If you’ve gotten this far without a full-blown panic attack, congratulations.  But in any event, take a step back, breathe, and then get to work.  The CTA is far-reaching and will impact almost every corner of your practice in some way or another.  But you can manage this new set of requirements by taking a step-by-step, systematic approach to understanding the requirements, knowing how your practice and clients generally fit into the scheme of the CTA, determining the limits of what you or your firm can take on, and creating safeguards against malpractice claims by making sure things don’t slip through the cracks.  Don’t be caught without an answer for your client when they ask how you can help them with the CTA or if it impacts them.  Even if you are not taking on the work, be prepared to refer out if possible.  Your clients will thank you. 

Author

Elizabeth (“Beth”) Boehmcke graduated cum laude from the University of Michigan Law School in 1993. After graduation from law school through 2003, she specialized in high net worth estate planning, with an emphasis on cross-border and asset protection planning, and the representation of fiduciaries managing complex trusts and family businesses. During her career in New York, she was an associate attorney at both Rogers & Wells (now Clifford Chance) and Hodgson Russ in New York City. After a hiatus in her legal career to care for her children, she resumed her legal career by passing the Virginia bar in 2014 and began working for the Hook Law Center, P.C., where she expanded her estate planning practice to include elder law, specifically focusing on asset protection planning for Medicaid and Veteran’s benefits. She is a proud graduate of the University of Virginia where she received a B.A. with distinction in Psychology in 1988 and is also a graduate of SUNY-Buffalo where she received an M.A. in Clinical Psychology in 1990.

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