Blog Archives

Why Do Businesses Close?

5/25/2018

A new fact sheet by the SBA Office of Advocacy Research Economist Brian Headd titled, “Why Do Businesses Close,” using U.S. Census Bureau data, states that over the last 25 years, about 7–9 percent of employer firms close every year and a slightly higher share open.
These figures from Census’s Business Dynamics Statistics have been trending down, illustrating a decline in business turnover. According to the Annual Survey of Entrepreneurs, of the businesses with employees that closed in 2015, the top reasons for closing were low sales, the owner(s) retiring, and the owner(s) selling the business. With the next top reasons being opening another firm and illness/injury, it shows that many owners close for personal or health reasons not just business reasons.
Headd also cited data from the Survey of Business Owners that despite credit being tight; it is having less of an impact on pushing businesses to close. While business credit was a relatively large reason for business closures at the onset of the Great Recession, Headd writes, more recently, it has been a relatively small reason.

FDIC Regulation To Track Beneficial Owners of Business Accounts

5/10/2018

In 2016, the Federal Deposit Insurance Corporation (FDIC) published regulations, which were authorized by the Bank Secrecy Act, to require all US Financial Institutions to obtain the identity of the beneficial owners of business accounts for a corporation, limited liability company, or other entity that is created by the filing of a public document with a Secretary of State or similar office, a general partnership, and any similar entity formed under the laws of a foreign jurisdiction. This is not personal accounts. The procedures are to be implemented by May 11, 2018. When a business opens a new account or changes an existing account, financial institutions will have a “control person” obtain information and sign a certification on behalf of the business. The certification lists for all beneficial owners who have 25% or more of the equity interests in the businesses their names, addresses, dates of birth and some identifying number (Social Security, passport, driver’s license, etc.). The control person (usually an authorized signer) is someone with significant managerial control over the business. The regulation does not cover accounts opened and later unchanged as of May 10, 2018, single transactions, wire transfers and other exceptions. A covered financial institution must establish procedures for making and maintaining a record of all information obtained under this procedure. Therefore, there is no anonymity as to the beneficial owners in regard to the business’s accounts at financial institutions.

Beware of Solicitations to File Corporate Papers with the state

5/2/2018

Every year, about this time, corporations receive a mailing from a company, with names such as VIRGINIA (or other state) COUNCIL FOR CORPORATIONS or U.S. BUSINESS SERVICES. Such companies may use other names as state enforcement actions have stopped them from operating in some states. The forms appear to be the official forms from the state agencies and the cover letter states there is a fee. They are not official forms and the fee is not the fee that is required to be paid to the state. These are private firms that charge a fee for sending this form. I have not seen all of these mailings over the years, but usually in very small type it is stated that they are not official forms, so the mailings cannot be said to fraudulent. Some clients have been misled and were unable to get the money they paid refunded. Corporations and limited liability companies are required to pay to the state in which they are registered an annual or biennial fee and corporations are required to file annual reports. If McGeehan Pascale, PLC is your registered agent or you are a member of its Priority Business Client Program™, please call us for a No Charge Quick Call™ if you received such forms. Anyone also can go onto the state agency’s web site, as they generally have an alert to business entities regarding this practice.

Reminder: Corporations and limited liability companies are required to maintain their filings and pay their annual fee in the state in which they are formed and in any other state in which they are doing business. States may define what is meant by “doing business” and if you have questions concerning what that means in a given state, call us.

Author

John P. McGeehan is the managing member of McGeehan Pascale, PLC. His practice focuses on business structures, especially new, emerging, small businesses and not for profit organizations, all business transactions, employment law, real estate, commercial leasing, estate planning and litigation before administrative agencies and all courts.

Why Do Businesses Close?

FDIC Regulation To Track Beneficial Owners of Business Accounts

Beware of Solicitations to File Corporate Papers with the state

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