Basics of the Corporate Transparency Act

I.                 What is the Corporate Transparency Act?

The Corporate Transparency Act (“CTA”) was implemented as of January 1, 2024, to combat illicit financial activities. It requires certain companies to disclose information about the company’s “beneficial owners” to the Financial Crimes Enforcement Network (“FinCEN”). This information will be stored in a federal database accessible by some government officials.

II.               What are the deadlines and penalties for noncompliance?

For companies in existence prior to January 1, 2024, they must file a Beneficial Ownership Information Report (“BOIR”) on or before January 1, 2025. Companies formed after January 1, 2024, must file a Beneficial Ownership Information Report within 90 days of creation. Non-compliance poses a potential civil fine of up to $10,000 and criminal penalties, including imprisonment for up to two years. For these reasons, it is imperative that qualified reporting companies and their beneficial owners file on time and accurately.  

III.             Which companies qualify as “reporting companies” and must report?

The U.S. Treasury Department has specified the following forms of companies, referred to as “reporting companies,” which must complete the BOIR. Reporting companies include corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States. This excludes any partnerships or sole proprietorships that are created without filing with a secretary of state and also trusts.

IV.            Are there any exemptions?

Several specific business exemptions, 23 in total, exclude some companies from needing to file a BOIR. These include accounting firms, securities brokers, inactive entities, and large operating companies. Of particular interest to most businesspeople will be the exemptions for large operating companies and inactive entities. If the relevant criteria are met, then such businesses need not file a BOIR.

A large operating company is defined, in part, as companies having (a) more than 20 full-time employees; (b) gross receipts or sales in the previous year’s federal tax return of greater than $5,000,000; and (c) a physical office or operating presence in the United States.

An inactive entity is not as simple as it sounds. It is defined, in part, as companies having (a) existed before January 1, 2020; (b) no active business engagements; (c) not experienced a change in ownership in the previous 12 months; (d) not sent or received more than $1,000, directly or indirectly, in the previous 12 months; and (e) no assets of any kind. An entity created after January 1, 2020, would not be exempt from filing.

V.              Who from my Company qualifies as a “beneficial owner” and needs to file?

If your company meets the definition of a “reporting company,” then all of its “beneficial owners” must provide the necessary information in the BOIR. To qualify as a “beneficial owner” one must either:

• Exercise substantial control over the reporting company. This includes any board members, senior officers, chief executives, managers, and similar positions which have the authority, among other things, to bind the company to a contract, make major expenditures on behalf of the company, have the authority to hire/firm and set pay; or

• Own or control at least 25 percent of the ownership interest in the reporting company. Ownership encompasses total equity, stock, or voting rights; a capital or profit interest; convertible instruments; options or other non-binding privileges to buy or sell any of the foregoing; and any other instrument, contract, or other mechanism used to establish ownership. A reporting company may have multiple types of ownership interests.

However, reporting companies are not required to report the reason (i.e., substantial control or ownership interests) that an individual is a beneficial owner.

VI.            Are there any exemptions from being a beneficial owner?

There are limited exceptions to having to report as a beneficial owner of a reporting company. These include minor children, a custodian or agent of another person, an employee who is solely an employee and not a senior officer, someone whose only interest in a reporting company is a “future interest” through right of inheritance (i.e., a child of an owner who’s devised an ownership interest in a will upon said owner’s passing), and a creditor of a reporting company. Absent these few exceptions, a reporting company must report all of its beneficial owners.

VII.          What information must be filed with the FinCEN?

A reporting company must include in the BOIR the following: (a) its full legal name; (b) any trade or “doing business as” name; (c) the complete current address for the principal place of business; (d) the jurisdiction of formation; (e) and its tax identification number.

In addition to the above information, the BOIR must include the following information for each beneficial owner: (a) full legal name; (b) date of birth; (c) address; and (d) and an image of one of a non-expired U.S. passport, state driver’ license, state or tribal issued identification card, or a foreign passport.

We provide filing services for CTA compliance. If you would like our assistance with filing, please do not hesitate to contact our firm at CTA@bernicklifson.com.

Brice Bullock Michka Business and Corporate

Electronic Will Signing - New Law

Minnesota’s 2023 legislative session proved to be one of the busiest in the state’s recent memory. Among the numerous legislative changes is the newly enacted Uniform Electronic Wills Act. This Act reworks Minnesota Statutes Section 524 and adds Minnesota to the small but growing list of states recognizing the use of electronic wills. As summarized below, the relevant changes will make the estate planning process more accessible for Minnesotans statewide when they take effect on August 1, 2023.

The primary change can be found in the legislature’s definition of “Will” – which has been amended to include electronic wills; any codicil to an electronic will; and any testamentary instrument revoking, revising, or appointing an executory to an electronic will. Accordingly, “Electronic Will” has been defined broadly as any will or codicil that is 1) created, signed or maintained in an electronic form; 2) retrievable; and 3) capable of verifying that the writing of the electronic will has not been altered after its signing.

Elsewhere, the legislature has taken steps to address questions of how to properly sign and witness electronic wills. In short, the acknowledgement of the testator and affidavits of witnesses no longer must be made before a notary but rather may be made in the presence of one. Along these lines, “Presence” or “conscious presence” have been defined as 1) being in the same physical location as the testator; or 2) being in a state of communication with the testator by means of an electronic device allowing an individual to see and hear the testator as if they were in-person. Definitions for “Signed” or “signing” have also been expanded to include electronic symbols or marks that signify an intent to execute, witness, or authenticate the writing.

Our estate planning attorneys at Bernick Lifson P.A., Sally Forbes Friedman and Richard Bunin, are prepared to navigate Minnesota’s new estate planning laws in a way that affords you confidence, flexibility, and peace of mind. Call or email us at: 763-546-1200.

Divorced? Time to Check Your Will!

Minnesota Courts have recently enunciated serious changes to the way they interpret the state’s complicated estate planning laws. As a result, there is no better time to review your will with one of our trusted estate-planning attorneys.

For over two decades, Minnesota Courts have held that the facts and circumstances surrounding a divorce defeat any language in an existing will devising a portion of one spouse’s property to the legal heirs of their ex. More recently, however, the Court of Appeals reached the opposite conclusion in In the Matter of the Estate of: Matthew Joseph Tomczik, Deceased –  holding that a divorce from one’s spouse does not necessarily cut ties from their family.

This case involved a couple who divorced in 2019. The husband’s will, drafted in 1995, instructed that his estate be split equally between he and his wife’s legal heirs at the time of the surviving spouse’s death. He passed away in 2021 with no legal heirs. Even though Minnesota Law instructs courts to interpret the revocation of a marriage as if the former spouse died immediately before the annulment, it remains silent on what to do where the will refers to the legal heirs of that former spouse. Surprisingly, the Court of Appeals resolved this ambiguity by going against the likely intent of the husband’s will and devising the entirety of his estate to the sole legal heirs of his ex-wife – her parents.

Does your will continue to reflect your estate planning goals? Our estate planning attorneys at Bernick Lifson P.A., Sally Forbes-Friedman and Richard Bunin, have an understanding of these new developments and are eager to help you tailor your will to your individual circumstances.

Call us at: 763-546-1200  or email:   Sally Forbes Friedman  or Richard Bunin  

Benefits of Operating as an LLC

If you are in the process of creating a new business, there are many different business entity options from which to choose. Among small businesses, a limited liability company (“LLC”) is a very popular choice because of its many advantages. Below we have detailed some of the common benefits to operating an LLC:

1)     Limited personal liability. Perhaps the greatest and most obvious benefit to operating as an LLC is that you as an individual have limited liability if something goes wrong. An LLC is legally separate from its members. This means that your personal assets, such as your home, personal savings, and collections, are protected from being used to collect the debts of the business. The only amount that you can “lose” is what the business actually owns. Other types of business entity, like corporations, also have limited liability for owners, but the LLC has additional advantages.

2)     Fewer formalities. LLCs do not need to follow the same administrative requirements as corporations. Corporations must follow rules regarding meetings, shareholders, and record-keeping. LLCs, on the other hand, are not held to the same extensive requirements.

3)     Tax benefits. A huge advantage to the operation of LLCs includes the tax benefits. An LLC can adopt the tax status of a partnership, taking advantage of a partnership’s “pass-through taxation.” Pass-through taxation means members of an LLC pay income taxes on their own tax returns, while the LLC does not pay taxes. This is alternative to a certain type of corporation where income is taxed both for the corporation and the shareholders, known as “double taxation.”

4)     Management flexibility. LLCs do not require a formal structure for operation: they are flexible in how they conduct business. An LLC is not required to elect a board of governors. The offered flexibility ranges from all members actively managing day-to-day affairs, to some members not participating in management, or even to a structure similar to a corporation’s board of directors.

5)     Flexibility in profits. In accordance with IRS rules and other laws, members in an LLC can set up profit distributions however they see fit. The profits do not need to be distributed equally among owners. For example, if one member works fewer hours, that member may receive a smaller share of the profits.

Overall, the entity you choose for your company forms the foundation of your business. An LLC may be a good choice for you. It is important that you discuss your options with an attorney and select the entity best suited for your business goals. If you have any questions, please do not hesitate to contact one of our experienced attorneys practicing in the area of business law:

Saul A. Bernick

Richard D. Bunin

Marvin A. Liszt

Jack E. Pierce

Malcolm P. Terry

4th Quarter Review – An Estate Planning Checklist

While I thoroughly enjoy football, I have no idea how to plan the game winning play.  What I do know is that we are in the fourth quarter of the calendar year and it is time to consider your personal game plan.  During the past 20 months, many of us have had to unintentionally evaluate our personal game plan due to the onset of medical issues, staying at home, changes in jobs or just general changes. I am optimistic that rather than looking at every situation through the lens of a crisis, we should take a breath, and be more strategic with our personal planning. As practitioners, we have been responding to clients, on an almost daily basis, who have been confronted with emergency planning situations or are considering the “what if” or “what happens if the unthinkable occurs.” If you have not reviewed your game plan in a while, this is the right time to make sure everything is in order. 

Following is a brief personal and estate planning checklist for you to consider as we start the final quarter of the year: 

1. Do you have the basic estate planning documents, including a Will, Powers of Attorney and Medical Directives? When did you last review the documents?  It may be time to dust off the documents and update them.

2. Has your financial and/or family situation changed since the basic documents were drafted? Have you had more children, grandchildren, marriages, divorces, deaths and has your financial situation changed so that more planning is needed?

3. Identify who you would like to leave your estate to; do any of your family members have an identified long-term disability or special needs? Are trusts needed to protect your beneficiaries?

4. Take the time to prepare a list of assets; are the beneficiary designations correct on retirement accounts or life insurance policies?

5. Who have you named as your Personal Representatives, Trustees, Guardians (do you still need to designate Guardians), and Attorneys in Fact for Powers of Attorney, and Agents for the Medical Directives?

6. Have you made a separate list of all of your passwords so your fiduciaries can access your information?

7. Do you want to consider gifts to charities?

8. Have you purchased a winter residence in another state? 

9. Are all of your assets transferred and funded into your Revocable Trust?

10. Have you completed the list of personal property or are you relying on your family getting along when it is time to distribute the cherished items from your personal property?

11. Check with your team of professionals, including your attorney, accountant and financial planner to review your plans. 

A Will may have been initially sufficient and met your estate planning goals and objectives, but now you own a winter home in California and a primary residence in Minnesota.  Surely, you would not want to go through probate proceedings in both Minnesota and California. In many circumstances, including this example, it is time to consider a Revocable Trust, Will and supporting documents. 

The above list is not all inclusive, but certainly identifies areas to consider.  Coupled with all of the items on the checklist is the continued uncertainty about the pending changes to our State and Federal estate tax laws and supporting regulations.  It is highly likely that the overall exemption at the Federal level will be reduced, but when and how much is still to be determined. 

We have always known that we do not know what tomorrow will bring, but the past 20 plus months have heightened that awareness.  I encourage you to take the time to review your estate planning documents, consider your legacy and create your own checklist. 

Our estate planning attorneys at Bernick Lifson, Sally Forbes Friedman and Richard Bunin, are available to coordinate and work with your team of professionals to evaluate, update and prepare your estate planning documents.  We have returned to the office and are available to meet with you, subject to our COVID protocols.  Call or email us at: 

          Sally Forbes Friedman    sfriedman@bernicklifson.com 

          Richard Bunin   rbunin@bernicklifson.com  

Dangers of Waiving a Home Inspection in Minnesota

Home Buyer Beware: Waiving the Right to a Home Inspection can be a Costly Mistake

Competitive bidding in a seller's market is nothing new. The combination of low interest rates, low inventory, and a sharp rise in sales price for single-family homes has created an unprecedented advantage for sellers in the current Twin Cities housing market. However, buyers waiving the right to a home inspection before closing is uncharted territory.

Is waiving a home inspection a good idea, and what's covered with Minnesota home inspection laws?

In short, no. Waiving a home inspection is not a good idea. While there may be immediate gain as you get to purchase the house you desire, the decision to waive a home inspection may lead to severe problems months or years later.

Electing not to have a home inspection or waiving the right to the inspection typically means that the buyer's only information regarding the property's structural condition is the seller's disclosures.

Disclosures mandated by Minnesota law require sellers to disclose information regarding the condition of the house and garage, including foundation issues, alterations/remodeling, and water intrusion. However, the seller only needs to disclose material facts that could adversely or significantly affect the buyer's use and enjoyment of the property. Minnesota law explicitly protects the seller from liability for any error, inaccuracy, or omissions that were not within the personal knowledge of the seller.

In many instances, a seller may not be aware of foundation damage or a structural defect; this is precisely why a buyer should always elect for an inspection contingency in the purchase agreement and retain a licensed inspector. Issues raised in a home inspection provide the buyer with bargaining power to negotiate the purchase price or cancel the purchase agreement if costly repairs are recommended.

Waiving a home inspection leaves a buyer with little or no recourse against the sellers. Even if the owner failed to disclose known defects, a buyer would typically need to prove the owner's conduct rose to the level of fraudulent misrepresentation. Arbitration or litigation is expensive and time-consuming. More importantly, an arbitration claim must be filed within two years after the sale's closing date, and structural defects may not come to light within those two years.

Using Good Strategy

Purchasing a new home can be stressful and sometimes exhausting, given the current market. Buyers may believe waiving a home inspection makes their offer more attractive to the seller, but it's not necessarily a good strategy. The buyer may win the battle, meaning they get their desired home, but they can still lose the war because of the structural problems they've inherited. Waiving a home inspection could result in years of costly repairs with no recourse against the seller.

Welcome Richard D Bunin!

Richard D. Bunin recently joined Bernick Lifson, bringing his years of experience in the areas of estate planning, probate, elder law, real estate, and business law to our firm. Rick has a robust estate planning practice, and he prides himself on taking the time to help his clients identify their estate planning goals and objectives. He carefully crafts estate plans incorporating complex legal issues while also ensuring his clients understand the practical consequences. After practicing for so many years, Rick now represents second and third generations of families.

Rick’s clients also include small business owners who require assistance forming corporate entities and maintaining state and federal regulations compliance. His expertise in transactional real estate is an advantage for both his probate and business law clients.

The Bernick Lifson estate planning, trust, and probate administration department have doubled in size since Rick joined the firm. Sally Forbes Friedman and Rick Bunin’s combined experience is a valuable resource for clients.

The Corporate Transparency Act & Your Business

On January 1, 2021, Congress passed a set of provisions innocuously titled the Corporate Transparency Act (CTA) as part of the annual National Defense Authorization Act. This bill aims to help fight tax evasion, tax fraud, and other financial crimes by implementing a national database collecting registration information for all corporations and limited liability companies organized in the United States.

The reason why this is important is that when Congress said all, they truly meant all. As a result of the Corporate Transparency Act, all corporations, LLCs, and other entities registered with a state or Indian Tribe in the United States are subjected to these new reporting requirements. The Treasury Department has until the end of the year to promulgate the appropriate regulations, but all new or previously organized entities will have to comply with them.

The Corporate Transparency Act requires each beneficial owner to submit certain information to the Treasury Department upon registration of their business entity. A “beneficial owner” is an individual who exercises substantial control over the business entity, or owns or controls 25% or more of the ownership interest of the business.

Each beneficial owner will be required to submit the following information:

• A full legal name

• Their date of birth

• A current residential or business street address

• An identification document

The form of ID can be a passport, government ID, or driver’s license. Upon registration, this information will need to be submitted to the Treasury Department and must be kept updated if the entity remains in force.

It is never too early to begin preparing for the submission of this information. Bernick Lifson has been awaiting the Treasury Department’s final directions on how and when this information will need to be submitted. If you are looking for advice on how to handle these changes related to the Corporate Transparency Act and for assistance with other corporate transparency inquiries.

The Eviction Moratorium Phaseout

By signing the 2021 Omnibus Housing Finance Bill, Governor Tim Walz voided all previous eviction moratorium rules outlined in the Executive Orders and began the next return phase to pre-pandemic eviction laws. Aptly titled “Eviction Moratorium Phaseout,” the new law relating to residential tenants provides a process of gradually removing restrictions on filing eviction actions, providing a notice to vacate, or terminating a lease.

New Rules: Notice of Intent to File an Eviction

Minnesota Executive Order 20-79 required a 7-day notice of intent to file an eviction prior to filing all eviction actions. The phaseout requires a 15-day notice of intent to file an eviction only for eviction actions based on nonpayment of rent.

For all nonpayment eviction actions, a written notice provided to tenants at least 15 days prior to filing an eviction is required until October 12, 2021. This notice must contain information including: “(1) the state eviction moratorium has ended and the tenant may soon be subject to an eviction action; (2) the total amount of rent past due; and (3) a tenant should visit Rent Help MN or call 211 to see if they are eligible for financial assistance.”

The phaseout does not reference the method by which the notice is to be served on the tenant. To avoid further delay or defenses, our advice is to send the notice by first-class mail and post it on the property to ensure the resident receives the notice.

Eviction actions based on seriously endangering the safety of others, significant damage to property, or violations of Minn. Stat. § 504B.171 (unlawful activity).

Currently, eviction actions can be filed for seriously endangering the safety of others, significant damage to property, and violations of Minnesota Statutes § 504B.171 which includes tenant covenants related to unlawful activity, including controlled substances, prostitution, unlawful use or possession of a firearm, and stolen property. Under the phaseout law, there is no longer a requirement to provide a notice of intent to evict prior to filing these evictions.

Eviction actions based on tenant’s refusal to apply for specified rent assistance.

Once the 15-day notice is sent via first-class mail and posted, you may now also proceed with an eviction action for nonpayment of rent if the tenant is eligible for rental assistance through a COVID-19 emergency rental assistance program but refuses to apply for the specified rent assistance.

Eviction actions based on material violations of the lease.

On or after June 30, 2021, you can provide notices of lease termination or nonrenewal of lease to tenants that have materially violated the lease other than nonpayment of rent. On or after July 14, 2021, you can proceed with eviction actions for material violations of the lease other than nonpayment of rent. You are not required to provide the 15-day notice of intent to file an eviction prior to filing these evictions.

Eviction actions based on nonpayment of rent and tenant is not eligible for rental assistance.

On or after August 13, 2021, leases can be terminated for tenants who are not eligible for COVID-19 rental assistance and are past due on rent. On or after September 12, 2021, you can proceed with eviction actions against tenants with outstanding rent balances who are ineligible for rental assistance. You are required to provide the 15-day notice of intent to file an eviction prior to filing these evictions.

Expiration of Moratorium and Phaseout Procedures

On or after October 12, 2021, all eviction actions will be allowed, other than matters involving nonpayment for tenants eligible for applicable rental assistance with a pending application.

For additional information regarding the phaseout legislation or specific questions related to your properties, contact Bernick Lifson.

Disclaimer: The information provided is based only on current Minnesota law. Conflicts may arise with existing federal rules and statutes.

Ejectment Actions in Minnesota During the Ban on Evictions

Prior to the COVID-19 pandemic and related peacetime emergency in Minnesota, landlords had the right to evict renters from their properties under a wide variety of circumstances. That changed in 2020 when the "moratorium" or ban on evictions was put in place to help combat the fallout from the COVID-19 virus and related financial turmoil in the Minnesota community. With eviction actions now off the table, some property owners are looking into an older and lesser-known legal action to recover possession of real property that remains unaffected by the current eviction moratorium in Minnesota.

Since March 2020, Minnesota Governor Tim Walz has barred landlords from evicting renters from their real property with few exceptions. On July 14, 2020, he issued Emergency Executive Order 20-79, which modified the suspension of evictions and writs of recovery during the COVID-19 peacetime emergency in Minnesota. The Executive Order states, in relevant in part, that:

The ability of property owners, mortgage holders, or other persons entitled to recover residential premises from filing an eviction action on the grounds that a residential tenant remains in the property after a notice of termination of the lease, after a notice of nonrenewal of a lease, after a material violation of a lease, after the termination of the redemption period for a residential foreclosure, or after nonpayment of rent, is suspended.

Pursuant to this Executive Order, the ability of property owners or other persons entitled to recover residential premises from filing an "eviction action" against a "residential tenant" has been suspended by Governor Walz. This Executive Order remains the most current description of the state of the eviction moratorium in Minnesota since Governor Walz first declared the peacetime emergency in late March 2020.

Importantly, Governor Walz's recent restrictions on evictions during the peacetime emergency present no barrier to bringing ejectment actions, where appropriate. As such, it is more important than ever to understand the difference between these two very similar possessory legal actions.

Minnesota law provides that evictions are only appropriate in specific situations—usually to terminate a tenancy or when a person "holds over" or remains at a property after the property has been sold or foreclosed. See Minn. Stat. § 504B.285, subd. 1(a). Similarly, in suspending eviction actions in Minnesota, the Executive Order applies only to actions against "residential tenant[s]." For purposes of an eviction action, "'residential tenant' means a person who is occupying a dwelling in a residential building under a lease or contract, whether oral or written, that requires the payment of money or exchange of services . . .." Minn. Stat. § 504B.001, subd. 12.

Ejectment is a more general but less common, possessory action and may be maintained by any person entitled to exclusive possession of real property against a person currently in possession of the same. The Minnesota Supreme Court has squarely held that the legal owner of the property has the right to possess it unless a contract (such as a lease or other rental agreement) has deprived them of it. To maintain an action in ejectment, the property owner must establish that another party has possession of the property and is withholding possession from the property owner without justification.

Simply put, an ejectment action is much more general in scope than an eviction action and not appropriate where a contract (such as a lease agreement) is in place to give another party the right to possess the property. Thus, where a property owner seeks to recover possession of their real property from another party who is not an authorized tenant with a lease agreement, the Executive Order presents no barrier to the property owner bringing an ejectment action.

At Bernick Lifson's, we are well-versed in eviction actions, ejectment actions, and Governor Walz's recent restrictions on evictions and terminating tenancies in Minnesota. If you have questions about recovering possession of your real property during these unusual times, don't hesitate to get in touch with us to discuss your rights and the remedies that might be available to you.