By Senior Associate Jeneva Vazquez

On January 1, 2024, the Corporate Transparency Act (CTA) officially took effect, introducing new reporting obligations for nearly all businesses in the United States. The legislation aims to increase transparency in corporate ownership and help combat global terrorism and money laundering. However, it also represents a significant shift for many small business owners who previously enjoyed a level of privacy in their operations.

What the CTA Requires:

Under the CTA, most businesses are now required to submit a report to the Financial Crimes Enforcement Network (FinCEN), detailing information about their “beneficial owners.” A beneficial owner is defined as any individual who directly or indirectly exercises substantial control over the business or owns at least 25% of the company. This includes key management roles such as LLC managers, board members, and CEOs. The CTA represents a significant shift in the regulatory landscape for small businesses.

The report must include personal details for each beneficial owner, including: full legal name, date of birth, current residential address, and a copy of a government-issued ID (e.g., U.S. passport or driver’s license)

For businesses formed before January 1, 2024, there is a grace period until January 1, 2025, to submit the first report. After the initial report, businesses must notify FinCEN of any changes to the reported information.

Failure to comply with the CTA can result in significant penalties, including daily fines of $500 and potential criminal penalties of up to two years in prison.

Who Must Comply with the CTA?

The CTA applies to most entities formed or registered in the U.S., with certain exemptions for larger operating companies and nonprofit organizations already subject to extensive regulatory oversight.

If your business was formed before January 1, 2024, it’s crucial to make a plan to comply with these reporting requirements by the January 1, 2025 deadline. Failure to do so could result in costly fines.

How We Can Help?

To help you navigate the new CTA requirements, we’ve included beneficial owner reporting as part of our Annual Business Maintenance Plan for clients. If you’re interested in having us handle the reporting for you, the deadline to sign up is November 25, 2024.

We will not only submit the initial report but can also assist with filing any amendments for as long as you remain a member. The Annual Business Maintenance Plan includes quarterly telephone calls, us filing your annual report with the Secretary of State, a discount on future legal services, and other things that you can see HERE.

It’s essential to understand these new obligations and ensure timely compliance to avoid penalties. If you need assistance filing your beneficial owner information before the reporting deadline, please contact us before November 25, 2024.

​By Associate Attorney Heather McKaig

Holding companies are having a resurgence in popularity recently.  Interest, as represented by Google searches, has steadily grown and experienced a marked increase in the past eighteen months.  A holding company is a parent company, usually a corporation or LLC, that owns or controls other companies.  Some holding companies are created just to own property, such as real estate, intellectual property, or stocks.

Unfortunately, holding companies and their structure can be misused by those attempting to conceal information about the nature of their businesses in multiple tiers of management or by the holding company itself exerting overreaching control and making unreasonable demands of its subsidiaries.

Most business owners who express interest in holding companies cite liability protection and loss protection as their primary purposes for having one. However, like other corporate entities, the liability protections of holding companies can be disregarded by courts in favor of creditors if the companies are not formed, owned and managed correctly.

Holding companies are not the only means to protect assets from creditors. Both corporations and LLCs provide protection of an individual’s assets from business creditors. And having properly organized, separate LLCs or corporations keeps creditors of one business from reaching the assets of another business.

Holding companies are subject to the same formation, reporting, and maintenance requirements and fee schedules as other companies.  Each subsidiary within the holding company must also keep up with its own corporate governance in addition to its day-to-day management.  Adding the holding company framework creates more work for the business owner in filing and compliance, not only upon formation, but also with regular reporting each year.  More tiers of reporting and compliance brings unnecessary expense and added risk of a missed deadline or annual report. Therefore, the holding company framework is sometimes more trouble than it is worth.

If you are interested in having a discussion about what business structure is right for you, please give Jesson & Rains a call!

By Attorney Kelly Jesson

We previously reported back in April that the Federal Trade Commission (“FTC”) banned non-compete agreements effective September 4.  Almost immediately, the rule was challenged in many courts.  Earlier this week, a federal judge in Dallas struck down the ban across the entire nation, holding that it was “unreasonably overbroad” and the FTC lacked the authority to enact the rule.  Therefore, local business owners can continue to utilize non-compete agreements to protect their proprietary information when an employee with insider knowledge leaves to work elsewhere.  However, our courts will not enforce a non-compete agreement that is not narrowly tailored in scope and geographical area to accomplish that goal, so business owners should seek the assistance of an attorney when putting these in place.

If you have any questions, or need assistance with an employment agreement, please give Jesson & Rains a call! 

​By Attorney Kelly Jesson

Last month, the Department of Labor issued its final rule regarding changes in the overtime laws for “white collar” exempt employees. Before discussing this change, here is some background on the law.

Federal law states that every employee must be paid at least minimum wage and overtime if they work more than 40 hours per week unless they fall under an exemption.  The two types of exemptions we discuss here are: (1) bona fide executive, administrative, professional, or computer employee capacity; and (2) highly compensated employees.  Outside sales rules were not touched.

To fall under the bona fide executive, administrative, or professional, the worker must: (1) be paid a salary, meaning that they are paid a predetermined and fixed amount that is not subject to reduction because of variations in the quality or quantity of work performed; (2) be paid at least $684 per week (equivalent to $35,568 per year); and (3) primarily perform executive, administrative, or professional duties.

These duties are not what you might think!  Administrative does not mean clerical.  For the administrative exemption to apply, the employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and the employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

For the executive exemption to apply, the employee’s primary duty must be managing the enterprise or a department or subdivision of the enterprise; the employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and the employee must have the authority to hire or fire other employees or make recommendations as to the hiring or firing of others.

For the professional exemption to apply, the employee’s primary duty must be the performance of work requiring advanced knowledge, predominantly intellectual in character which requires the consistent exercise of discretion and judgment; the advanced knowledge must be in a field of science or learning; and the advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

For the computer employee exemption to apply, the employee must be a computer systems analyst, computer programmer, software engineer or other similarly skilled worker whose primary duties consist of the application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications; the design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; or the design, documentation, testing, creation or modification of computer programs related to machine operating systems.

Prior to July 1, 2024, if you are or have an executive, administrative, professional, or computer employee and they are NOT making $684 per week ($35,568 annually), they are NOT exempt and you must pay them overtime.  Computer employees can satisfy the salary test if they are paid $27.63.   Employers can satisfy up to 10% of the salary level through the payment of nondiscretionary bonuses and incentive payments (including commission) paid annually or more frequently.

Starting July 1, 2024, that threshold number is increasing to $844 per week ($43,888 annually).  That means if you are a business owner and you are classifying employees as exempt based on this exemption, you need to evaluate what you are paying them and potentially start paying overtime or provide them with a raise to remove the overtime requirement.  Starting January 1, 2025, the minimum salary threshold will increase again to $1,128 per week ($58,656 annually)!  This is a huge jump in less than a year!  But remember, this exemption does not apply to clerical workers because they are not exempt from overtime anyway.  The $27.63 still applies to computer employees, and employers can still satisfy the salaries with qualifying commissions and bonuses.

Currently, highly compensated employees performing office or non-manual work and paid total annual compensation of $107,432 or more (which must include at least $684 per week paid on a salary or fee basis) are exempt if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption.  On July 1, 2024, the threshold for this exemption will rise to $132,964!  January 1, 2025, it goes up to $151,164. 

Lastly, starting July 1, 2027, the salary thresholds will update every three years using current wage data to determine new salary levels.

These are the general rules.  There are exceptions for certain blue collar workers, teachers, academics, lawyers, doctors, etc. and also exceptions for certain U.S. territories. Please contact Jesson & Rains to discuss how this law change might affect you. 

​By Attorney Kelly Jesson

But don’t panic because it is already being challenged. The first lawsuit was filed within hours, and other businesses and the U.S. Chamber of Commerce have vowed to challenge the law on the grounds that the Federal Trade Commission (“FTC”) lacks the legal authority to promulgate such a rule. If any of these parties get an injunction, the implementation of the rule may be delayed.

The rule will go into effect 120 days after it is published in the Federal Register. Unfortunately, we don’t know what that date is yet, but we will pass that along when we know (and it should be soon). Assuming the rule goes into effect as the FTC plans, here are the important points:

• The rule applies to employees and independent contractors.
• There is no need to rescind any existing agreements or redo any employment agreements containing non-competes. They all remain valid except for the non-compete clause. However, employers must notify all other current and former workers who have existing non-competes in place that the agreements are no longer enforceable before the rule goes into effect. The notice must: (i) Identify the person who entered into the non-compete clause with the worker; (ii) Be on paper delivered by hand to the worker, or by mail at the worker’s last known personal street address, or by email at an email address belonging to the worker, including the worker’s current work email address or last known personal email address, or by text message at a mobile telephone number belonging to the worker. There is a sample notice in the final rule that employers can use.
• Not all non-competes are banned. The rule does not cover nonprofit organizations. The rule also permits limited use of non-compete agreements between franchisees and franchisors.
• The rule also does not apply to non-competition agreements entered into as part of a "bona fide” sale of a business or of a person’s ownership interest in a business entity.
• Businesses can continue to utilize agreements to protect their trade secrets and confidential information (like NDAs) to protect proprietary information an employee might learn during employment.
• Non-solicitation clauses are not mentioned in the rule, so employers can continue to protect their business’s customers and employees from being poached by others.
• Finally, employers may continue to enforce existing non-competes with senior executives, but they cannot enter into new, future non-compete agreements with senior executives. Senior executives are defined as a worker who: (1) was in a policy-making position; and (2) Received total annual compensation of at least $151,164 in the preceding year annualized.

If you think the FTC ruling may affect your business, or if you need assistance with another non-compete related issue, please give Jesson & Rains a call.