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.
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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. The IRS warns taxpayers of a new twist on an old scam. Criminals are depositing fraudulent tax refunds into individuals’ actual bank accounts, then attempting to reclaim the refund from the taxpayers.
Here are the basic steps criminals follow to carry out this scam. The thief: • Hacks tax preparers’ computers to steal taxpayer data. • Uses the stolen information to file tax returns as the taxpayers. • Has refunds deposited into taxpayers’ bank accounts. • Contacts their victims, telling them the money was mistakenly deposited into their accounts and asking them to return it. While the IRS is aware of variations of this scam, the agency also knows that this scam may continue to evolve. Here are two current versions of this scam: • Criminals pose as debt collection agency officials acting on behalf of the IRS. The thief contacts the taxpayer to report an erroneous refund deposit and request that the taxpayer forward the money to the thief’s collection agency. • The taxpayer who received the erroneous refund gets an automated call with a recorded voice saying the caller is from the IRS. The recording threatens the taxpayer with criminal fraud charges, an arrest warrant and a “blacklisting” of his or her Social Security number. The recorded voice gives the taxpayer a phony case number and telephone number to call to return the refund. Here are some things taxpayers should remember if someone contacts them about an erroneous refund: • There are established procedures taxpayers should follow to return erroneous funds to the IRS. Tax Topic Number 161 - Returning an Erroneous Refund has full details about how to return the money, including the actual mailing addresses where a taxpayer should send a paper check, if necessary. By law, interest may accrue on erroneous refunds. • The IRS encourages taxpayers to discuss the issue with their financial institutions because there may be a need to close bank accounts. • Taxpayers receiving erroneous refunds also should contact their tax preparers immediately. This week, the U.S. Department of Labor issued revised administrative regulations regarding eligibility of workers to receive overtime. This covers all employers subject to the Fair Labor Standards Act or who are working on federal contracts. The revised regulations will:
* Raise the salary threshold indicating eligibility from $455/week to $913 ($47,476 per year). * Automatically update the salary threshold every three years, based on wage growth over time, increasing predictability. * Strengthen overtime protections for salaried workers already entitled to overtime. * Provide clarity for workers and employers. The final rule will become effective on December 1, 2016, giving employers more than six months to prepare. The final rule does not make any changes to the duties test for executive, administrative and professional employees (i.e. “expect employees”) and not all business are “employers” under the Wage and Hour laws. Employers will have the following decisions: * Pay all eligible employees who are below the new threshold “time and a half” for overtime * Limit worker’s hours to 40 hours per week * Hire more employees to share the time * Increase workers’ pay to a pay greater than the threshold Some business organizations may challenge this regulation in court, but overtime laws are complex and when combined with increases by state and local “living wage” laws, the impact can be significant. You may want to review your policies with us to ensure you are ready to comply with these requirements. We, at MCGEEHAN PASCALE, PLC, have put together, as best we can, a limited liability company designed to carry out the purpose of your business and, most especially, provide limited personal liability for the members from company liabilities. There are recent court cases attempting to “pierce the corporate veil”, which is to disregard the limited liability in an LLC and impose liability for company debts onto the members. As you move forward, it is up to you to do what you can to maintain your shield. There also are increasing statutes seeking to hold owners of businesses personally liable for some obligations. The older body of law for corporations is clear on piercing the shield, but there is less law regarding the limited liability shield in an LLC. The best way to protect yourself against this is:
1. Have an operating agreement. If it is not working, amend it. 2. Follow the procedures in the operating agreement, including having at least one annual meeting. 3. Maintain records (minutes) of important company actions. 4. Keep the company’s money in separate accounts from your personal accounts. 5. Do not pay personal bills with company money. 6. Make the capital contributions that are stated in the operating agreement. 7. If you give money to the company, document whether it is a loan, additional paid in capital, repayment of a loan to you by the company, etc. If you take money from the company, document whether it is a loan, withdrawal of capital, repayment of a loan from you to the company, etc. 8. Be formal in your dealings with those outside the company, that is always use your company name, sign everything using your company title, do not call each other a “partner”. Treat the company as you would a separate person with whom you are dealing. 9. Keep your capital in proportion to your company liabilities. 10. Seek experienced legal advice when you have any doubt as to an action you are contemplating. If you maintain you participation in MCGEEHAN PASCALE, PLC’S PRIORITY BUSINESS CLIENT PROGRAM℠, remember you have access to our No Charge Quick Calls (new topic, no reading, writing or research, less than 10 minutes), reduced hourly fees and experienced attorneys who are familiar with your business. Use this resource. The 2016 Virginia General Assembly enacted HB 955 changing the Virginia Limited Liability Company Act. It brings into the Act a new section on entity conversions (changing from one form of business structure to another), aligns LLC conversions with the Virginia Business Trust Act and provides for reorganization of an LLC in bankruptcy, as is provided for corporations.
The House continued HB 130 that would have established a series LLC in which managers, members, or interests can differ as to rights, powers or duties. Series LLC are great for aligning assets with liabilities with respect to specific property or obligations. MCGEEHAN PASCALE, PLC supports the enactment of HB 955 as it clarifies and removes discrimination against LLCs in the described matters. MCGEEHAN PASCALE, PLC favors not enacting HB 130 this year. For more than 25 years we achieved similar outcomes with a “Hershey® bar” structure of LLCs and a Virginia statute is desirable and can be less expensive. Between 15 -18 states and territories enacted laws permitting series LLCs, but the Uniform Protected Series Act (“UPSA”) was updated in 2016 and the General Assembly should wait and study this more current version. One or more companies have sent to Virginia companies, including our clients misleading forms. The companies are called “Virginia Council for Corporation”, “Corporate Records Service” and “Annual Business Services” and the forms are titled “2015 Annual Minutes” and “2015 Annual Records Solicitation Form”. The Solicitation Form looks somewhat like the annual report form prescribed by the State Corporation Commission and mailed to corporations of record in the Clerk’s Office of the SCC. Some corporations have confused the Solicitation Form for the Commission-prescribed annual report and sent money to these companies believing they have legally complied. In the case of LLCs, legally, the form is wrong.
A search of the Commission’s business entity records in the Clerk’s Office revealed no information about a company with the name Virginia Council for Corporation”, “Corporate Records Service” and “Annual Business Services” or that they are authorized to do business in Virginia although they have a Richmond address. These enterprises are commercial solicitations and they do not comply with state requirements. The companies do not file an annual form with the state or pay the annual fee to the state. If you are in the McGeehan Pascale, PLC’s Priority Business Client Program℠ and we are your registered agent, we receive and review the official state form and send it to you with instructions on filing it and paying the annual fee. If we are not your registered agent, you will receive an official form from the state, but call us if there is a question whether it is a legal form. We have looked into legal action for clients who believe they have been defrauded. The cleverness of the form makes that difficult to prove fraud. But, if you have other questions go to https://www.scc.virginia.gov or http://www.oag.state.va.us to make a complaint. |
AuthorJohn 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. Archives
March 2020
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