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Maura Curran, Attorney
Jupiter, FL 33458

How the Corporate Transparency Act May Impact Your Estate Plan Part 2


Does the CTA impact you?

Many business regulations apply only to large businesses, but the CTA specifically targets smaller entities. If you own a small business, you may be subject to this act unless your business falls under one of the stated exemptions, which primarily apply to industries that are already heavily regulated and have their reporting requirements.Your business may also be exempt from the reporting requirements if it employs more than 20 full-time employees, filed a return showing more than $5 million in gross receipts or sales, and has a physical office in the United States. Complying with the requirements of the CTA is of the utmost importance if you own a business entity or have one as part of your estate plan.

We routinely create entities that might qualify as reporting companies as part of our clients’ estate plans. These include LLCs and family limited partnerships.

Limited Liability Companies

An LLC is a business structure that can own many types of accounts and property. These entities can be used to provide asset protection and probate avoidance. Watch the FinCen video here.

Asset Protection

Because an LLC is a separate legal entity from its members, the LLC’s creditors can typically recover only business debts from the LLC’s money and property, not the member’s personal accounts or property. Also, if the proper formalities are in place, the member’s personal creditors may not be able to reach the LLC’s accounts and property to satisfy the member’s personal debts.

In some states, a single-member LLC does not enjoy the same protection from the member’s personal creditors. The rationale of these laws is that your creditors should be able to recover your personal debts through your LLC interests to satisfy their claims because there are no other members will be negatively impacted by the seizure of money and property owned by the LLC.

Probate Avoidance

Anything that is owned by the LLC—retitled into the name of the LLC during your lifetime, bought by the LLC, or transferred by operation of law at your death—will not go through the public, costly, and time-consuming probate process. The probate process only transfers

131 U.S.C. § 5336(a)(11)(B)(xxi).

Accounts and property that you owned at your death. By using an LLC to own accounts and property, the LLC—not you—owns them. However, if you own the membership interest in your own name, the transfer of the membership interest at your death may still need to go through the probate process.

Click here to read Part 3 of the CTA series