Corporate Transparency Act of 2022: Navigating the Complexities
Channel: Roy Oppenheim
Date: 2023-08-31

Roy Oppenheim from Oppenheim Law underscores the importance of understanding the imminent federal regulations on business entities, emphasizing the careful selection of corporation or LLC type and state, and the necessity of considering asset protection, tax implications, and correct establishment processes to ensure a solid foundation for your business.

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Originally posted at: https://www.oppenheimlaw.com/news-resources/videos/navigating-the-complexities-of-business-formation-corporation-llc-beyond/

Roy Oppenheim here for Oppenheim Law. I wanna talk about a little bit about business formation, whether you select a corporation or an LLC, and what state you select. And this is gonna be very tricky because starting in January, the federal government is creating a crazy database. I mean, it's insane, where they're going to want to know who are the actual principles of any LLC or corporation in the United States. And so whether you have an old company, you're gonna have like a year to comply. If you form a new company, you have like 30 days. And if you don't do it, it's, you know, you could be in violation, pay thousands of dollars, and it could also, you know, throw you in jail conceivably. But if you have an LLC that's owned by an LLC that's owned by an LLC, they're gonna wanna know who are the owners, the controlling people of that LLC.

And even if you're not a shareholder, if you're a lawyer who's very active involved in the company, if you're an accountant or a financial person, maybe the CFO who has active check writing capacity, you're gonna have to put your name down also as the person that's actively involved in that business. So, I'm not gonna go into detail about that statute right now, because we got six months and maybe the rules are just still being created and maybe there'll be a stop on it based on what's going on in the world. But having said that when you choose the formation that you're entered, you're using, whether it's an LLC, a corporation, an S-corp, or a C-corp you need to work very carefully, not just with your accountants. A lot of accountants set up these companies, but they're not focusing on the asset protection component of forming an LLC or an S-corp.

So, for example, in Florida, if you form an LLC and you're a single-purpose, single-member LLC. Yeah, that's great for maybe tax purposes. You won't have to file a lot of taxes. Yeah, maybe you're gonna have to pay some extra taxes because you can't do distributions. You're gonna end up, you know, paying yourself, having to pay the extra social security taxes, but you have no asset protection. So, a single-member LLC is typically not protected here in the state of Florida. So, you know, an S-corp or C-corp would be much better for you, but maybe you don't care about asset protection. Maybe you have a ton of insurance and you don't really care, or you have no assets to protect anyway. So, the circumstances change for each person. And so I wanna be clear that, you know, how you form these companies and what you do with 'em.

And you form a foreign corporation, meaning outside the State of Florida and you come into the state, well, you gotta register with the Secretary of State as a foreign corporation or a foreign LLC. These are the kinds of things you think you can do on your own, but you can't, even with all the AI out there, I highly recommend that you get yourself an attorney when you're forming a company so that the foundation of your company is solid so that you build a great company. It doesn't collapse because you didn't do something right at the beginning. And sometimes people don't have the money to do the stuff at the beginning. And my advice, if you don't have the money to do stuff at the beginning, you should wait a little bit so you have enough capital so that you will be successful. Because the last thing I want is for someone to have done something wrong and screwed up the way they formed their entities to begin with. And then the whole thing collapses because of something stupid they did, you know, early on in their business development.