Blog

Are You Prepared for the Corporate Transparency Act? Key Insights and Deadlines

The TL;DR of FinCEN BOIR: On December 27, 2024, the requirement of the FinCEN BOIR is on hold. Stay tuned.

UPDATE December 27, 2024, the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court’s preliminary injunction, meaning the Corporate Transparency Act (CTA) filing requirements have been reinstated and most filings will now be due January 13, 2025 instead of the December 31, 2024 prior deadline. However, a Fifth Circuit panel has reinstated a nationwide injunction blocking enforcement of the Corporate Transparency Act, three days after a different panel lifted it.

UPDATE December 26, 2024: On December 23, 2024, the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court’s preliminary injunction, meaning the Corporate Transparency Act (CTA) filing requirements have been reinstated and most filings will now be due January 13, 2025 instead of the December 31, 2024 prior deadline.

UPDATE December 3, 2024: In Texas Top Cop Shop v Garland et al. (case 4:24-cv-00478 December 3, 2024), the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction against the enforcement of the Corporate Transparency Act (CTA), questioning its constitutionality and its impact on small businesses. This means that if you have not yet completed the FinCEN Beneficial Ownership Information Report (“BOIR”), you do not need to do so at this time. However, please be aware that this ruling may be overturned in subsequent proceedings so be aware that while the requirement is suspended at this time, it may be revived in time to come.”

 

In 2021, Congress passed a new law affecting most businesses called the Corporate Transparency Act (CTA). Unfortunately, the majority of corporations and LLCs are unaware of this new regulation, which could lead to significant penalties as early as January 1, 2025.

The CTA’s purpose is to create business ownership transparency by identifying individuals who have either direct or indirect ownership (beneficial ownership) in a company. The overall goal is to alleviate fraudulent and illegal activities. The Financial Crimes Enforcement Network (FinCEN) began accepting Beneficial Ownership Information Reports (BOIR) through their website in January 2024.

States such as Delaware and Wyoming do not require corporations nor LLC’s to identify the owners of the entities, allowing for anonymity of said individuals. Congress views this as a potential threat to national security, as such secrecy could allow for foreign individuals or companies to acquire land or business interests that could potentially be against the interests of the nation or in violation of our laws.

Note that any information filed with FinCEN through a BOIR is not publicly available and the FinCEN database is private and for government use only. That being said, if you’ve created your entity in a state such as Texas, said information is public record through your filing with the Texas Secretary of State, as Texas requires entities to list all of its owners, regardless of their percentage.

Any reporting entity created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial BOIR. If you created your entity in 2023 or 1983, you have until December 31, 2024, to file your BOIR.

Entities created or registered in 2024 have 90 days from their registration to file this information, and those created or registered after January 1, 2025, will have only 30 days to file. So, if you create a reporting entity, such as a for-profit corporation, in early December of 2024, you will have until early March of 2025. However, if you create a reporting entity in late January of 2025, you will also have until early March of 2025 to report.

A beneficial owner anyone who directly or indirectly exercises substantial control over or owns or controls at least 25% interest in a business.

To clarify, an individual exercises substantial control over a reporting company if they fall into any of the following categories: a) If the individual is a senior officer; b) if the individual has authority to appoint or remove certain officers or a majority of directors; c) if the individual is an important decision-maker; d) if the individual has any other form of substantial control, or; e) if an individual has 25% ownership of the entity, regardless of how much or how little control they have as to the operations and management of the reporting company.

An entity may need to report information about its beneficial owners if it is a corporation, a limited liability company, or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Tribal jurisdiction; or if it is a foreign company registered to do business in any U.S. state or Tribal jurisdiction by such a filing.

Not all entities are deemed “reporting entities,” as they are required to state and/or federal regulations that require the reporting of beneficial ownership. These exempt entities include, but are not limited to accounting firms, banks, brokers/securities dealers, credit unions, governmental authorities, insurance companies, investments companies and advisors, public utilities, tax-exempt entities, and venture capital fund advisors. A good rule of thumb is that if your entity reports to a regulating agency, the odds are more likely that you could be exempt from the BOIR requirement. Saunders, Walsh & Beard recommends that you verify your entity is exempt before making any assumption.

When an entity is completing their BOIR, it is required to provide basic information for itself and all beneficial owners. The reporting entity must provide its legal name, trade names, address, jurisdiction of registration, and its taxpayer identification number. Beneficial owners must provide their name, date of birth, residential address, and an identifying number from an identification document such as a passport or driver’s license. As any entity from a multi-million-dollar corporation to a sole-owned LLC must file their BOIR, the information required by FinCEN is nothing complex or intricate, but it is still imperative that said information is filed by the deadline.

As a business owner, you might have received mailings from third parties charging $500 or more for them to file the BOIR on your behalf, but most BOIRs can be completed within 15 minutes by the business owner(s).

A failure to file may become extremely costly, with civil penalties starting at $500 per day and criminal penalties of up to $10,000 and/or two years in prison. You can file the BOIR online at https://www.fincen.gov/boi or mail in a hard copy of the report. Once the report is filed, it only needs to be updated if there is a change in ownership, or a change in any of the other information provided in the report, such as a change in the address of a beneficial owner.

While the government has not effectively informed the public of this new requirement and there is pending litigation stemming from such, we strongly encourage you to file before your entity’s deadline.

At Saunders, Walsh & Beard we are always happy to assist you with any of your business needs, governmental compliance, or otherwise. If you have any questions about this new requirement or if you have any other business issues, please do not hesitate to contact us to speak with one of our transactional law professionals.

Understanding Office Actions: A Guide for Trademark Applicants

Once you’ve applied for a trademark with the United States Patent and Trademark Office (“USPTO”), it will be months, if not longer, before you receive word that your application has been reviewed. So, when you receive notice from the USPTO that there’s an issue with your application, commonly known as an “Office Action,” it might seem disheartening, in all that waiting has been for naught.

An Office Action is an official letter from the USPTO Examining Attorney that states issues with your application that need to be addressed before your trademark can proceed to registration. If/when you receive an Office Action, here’s what you need to know and do.

1. Determine the Type of Office Action
There are two primary types of Office Actions: non-final and final.

1. A non-final Office Action raises concerns or objections about your application that can still be corrected or addressed. You will most likely receive a non-final Office Action first, and you will have an opportunity to amend your application or address any concerns that the USPTO Examining Attorney has raised.
2. A final Office Action means that the USPTO Examining Attorney was not satisfied with your responses to a prior non-final Office Action. Depending on the nature of the Office Action, you might receive multiple non-final Office Actions before the USPTO Examining Attorney sends the final Office Action. Once you receive a final Office Action, you will need to address all concerns raised by the USPTO Examining Attorney to their satisfaction, or risk a rejection of your application. That being said, if you do receive a final refusal from the USPTO, you do have the right to appeal to the Trademark Trial and Appeal Board.

2. Determine the Reasons for the Office Action
The Office Action will contain the reasons for the refusal in bullet point form, with each refusal being elaborated upon further down the letter.

• Likelihood of Confusion: This will be where the USPTO Examining Attorney might feel that your mark is too similar to one that is already registered. Trademarks are marketing materials, and the purpose of registration is to protect one’s brand, so the USPTO is extremely conscious of a risk of confusion in the marketplace.
• Descriptiveness: Your mark may be considered too descriptive of the goods or services offered. For example, if you made green shirts and you attempted to apply for the word mark of “The Green Shirt Company,” it would be refused as the name clearly states the product you sell. That being said, a company making green shirts that wanted to register the word mark “The Growling Tiger’s Shirt Company,” you’d have a better chance of success, so long as your shirts didn’t incorporate a growling tiger in the design.
• Specimen Issues: At some point prior to your registration, you will need to provide a specimen that shows you are using your mark in commerce. The USPTO might determine that the specimen you’ve provided is insufficient for reasons such as you haven’t showed how the mark is being used in commerce or the mark does not align with your applied class(es).
• Disclaimer Requirement: These Office Actions stem from the inclusion of a generic or descriptive portion within your mark. Going back to the example earlier, in an application for “The Growling Tiger’s Shirt Company,” the USPTO might require you to disclaim that you aren’t claiming exclusive ownership of the “Shirt Company” portion of the mark. As a whole, the mark is acceptable, but the USPTO wants to have you state that there are portions of the mark that are “public domain.” In a situation like this, the totality of the mark is more than a sum of its parts.
  Once you’ve ascertained what issues the USPTO has with your application, you can formulate a response to address the issues fully and swiftly.

3. Seek Legal Counsel
Some Office Actions might seem to be addressed easily enough, but experienced attorneys understand the nuances of particular Office Actions and might know of responses that could prevent additional Office Actions that stem from the initial response. You’ve spent a considerable amount of time and money in preparing your application, and you don’t want pride to jeopardize over a year’s worth of work and the associated costs.

4. Respond to the Office Action
If the Office Action is non-final, you must submit a response within three months of the issuance date. Note that until December 3, 2022, an applicant had six months to respond, from the issuance date. If you’ve had trademark experience in the past, it’s very important to note this distinction, because many individuals delay preparing a response, and this shortened deadline has caught some experienced business owners off-guard. An adequate response should:

• Address each issue raised by the examiner with specific arguments or amendments.
• If the issue is a likelihood of confusion, you may argue that your trademark is sufficiently different from the cited mark or that the goods and services are unrelated. Typically, in a situation such as this, using precedent of marks in similar positions is a good method in arguing your case for allowance.
• If the USPTO claims the mark is too descriptive, you could argue that the mark has acquired distinctiveness in the marketplace or that it the mark is suggestive rather than descriptive. For example, Greyhound would be considered a suggestive mark, because it suggests swiftness, but does not speak to a bus line directly. Much like likelihood of confusion Office Actions, these responses are typically nuanced and can benefit from an experienced attorney.
• For specimen rejections, you will need to submit a new specimen that better demonstrates the trademark in use. It could be a screenshot of a webpage or the packaging of the product.

5. Monitor Your File
The process of obtaining trademark registration requires attention to detail and deadlines. If you receive an Office Action, review it, ascertain what actions it requires, and plan your response. Additionally, you can always follow your trademark’s registration process through the USPTO’s Trademark Status and Document Retrieval system, that has the full history of all documents related to your filing, be it from the applicant or the USPTO. We recommend that you check any pending trademark bi-weekly, just to remain as informed as possible and avoid being blindsided by an upcoming due date.

If you’ve received an Office Action from the USPTO, don’t panic! Contact us today to help you navigate the response process and ensure your application stays on track for successful registration.