February 12, 2024
Passed in 2021, the Corporate Transparency Act established a federal standard for business incorporations with 20 or fewer employees and annual revenue under $5 million to file identifying information. In an interview with Los Angeles Business Journal and San Fernando Valley Business Journal, Partner Corinne Spencer and Affiliated Counsel Shaune Arnold, Managing Partner of Finney Arnold LLP, explained how the Act affects various types of entities.
“Any entity that is registered with the secretary of state and that distributes shares or equity to investors is going to be impacted directly by this Act,” Arnold said. “If you have an LLC, who are your unit holders? If you have a corporation, who are your shareholders? If you have a limited partnership, who are your limited partners?”
“Big picture, I think [the Act is] really an effort to try and get more oversight and control over money and equity in these types of businesses,” commented Spencer.
Beyond getting the information and filing the documents, Arnold said this has allowed Pearlman Brown & Wax to have conversations about corporate governance with clients the firm may not have served in the past.
“Some entrepreneurs who bring on investors don’t necessarily do things by the book,” she noted. “They may have taken a check and said, ‘you have X percentage of my company’ and then taken another check and another check and not really made it clear to their investors what their equity is. They also need to make sure their investors are not prohibited by the IRS.”
Read the San Fernando Valley Business Journal story here.
Read the Los Angeles Business Journal story here.
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