Category: News

The Final Rule Impacts Reporting Companies

All entities classified as “Reporting Companies” are mandated to submit BOI reports to FinCEN. An entity is deemed a Reporting Company if it came into existence in the United States by filing documents with a secretary of state or a similar office, or in the case of a foreign entity, if it registered to conduct business in the United States by filing documents with a secretary of state or an equivalent office. Reporting Companies include any entity that is (1) a corporation, (2) a limited liability company (LLC), or (3) created by the filing of a document with a secretary of state or any similar office under the law of a state or American Indian tribe.

There are 23 categories of exemptions from the Final Rule, and Reporting Companies that qualify under these exemptions will not need to file BOI reports (unless they later become non-exempt).  BOI reporting requirements are only applicable to Reporting Companies who do not meet an exemption. In general, the exemptions only cover highly regulated entities and other “low-risk” entities (e.g., large operating companies with a physical presence in the U.S., 501(c) nonprofit organizations, charitable trusts, split-interest trusts, publicly traded companies, SEC-registered companies, insurance companies, banks, etc.) Privately held entities typically used for estate planning, investments, real estate, tax planning, privacy, or personal purposes are generally not exempt. Therefore, in spite of the great number of exemptions, many newly and recently formed companies are not likely to qualify for an exemption and thus will be required to report.

What If A Reporting Company Is Owned By A Trust?

If an ownership interest in a Reporting Company is held through a trust, each of the individuals listed below is deemed to have an ownership interest in that Reporting Company:

1. A grantor/settlor who has the right to revoke the trust or otherwise withdraw the trust’s assets
2. A beneficiary who is the sole permissible recipient of the trust’s income and principal
3. A beneficiary who has the right to demand a distribution of or withdraw substantially all of the trust’s assets
4. A trustee of the trust
5. Any other individual who has the authority to dispose of trust assets

Depending on the specific circumstances, other individuals may also be considered to own or control ownership interests through a trust. This may include individuals like trust protectors, distribution or investment advisors of trusts, or beneficiaries of trusts with multiple beneficiaries. The determination of ownership interests through trusts can vary based on the particulars of each situation.

What Information Must Be Reported and by whom?

If you are required to report your company’s BOI to FinCEN, you will do so electronically through a secure filing system available via FinCEN’s website. Reporting Companies are required to furnish specific personal details of both “beneficial owners” and “company applicants” to FinCEN. A “beneficial owner” is any individual (can be more than one individual) who exercises “substantial control” over the Reporting Company or who owns or controls a 25% “ownership interest” in the Reporting Company. An individual exercises “substantial control” over a Reporting

Company if the individual meets any of four general criteria: (1) the individual is a senior officer; (2) the individual has authority to appoint or remove certain officers or a majority of directors of the reporting company; (3) the individual is an important decision-maker; or (4) the individual has any other form of substantial control over the reporting company. “Ownership Interest” includes any of the following: 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 “company applicant” is any individual who directly files the document that creates the domestic reporting company or registers the foreign reporting company, and the individual who is primarily responsible for directing or controlling such filing if more than one individual is involved in the filing. Not all Reporting Companies are required to report their company applicants to FinCEN. A Reporting Company is required to report its company applicants if it is a domestic or foreign reporting company created on or after January 1, 2024. Each Reporting Company that is required to report company applicants will have to identify and report to FinCEN at least one company applicant, and at most two. All company applicants must be individuals; companies or legal entities cannot be company applicants. If a client directs their attorney, spouse, business partner, accountant, etc. to file the formation documents of an entity, both the client and the second individual who actually filed will be company applicants.

A Reporting Company must disclose specific information about itself and the beneficial owners and company applicant. The Reporting Company disclosures include: (1) legal name, (2) trade name, (3) business address (cannot be a P.O. Box Number), (4) jurisdiction information, and (5) U.S. Internal Revenue Service taxpayer identification number. The beneficial owners and company applicant disclosures include: (1) legal name, (2) date of birth, (3) current address, and (4) an identification document with a unique identifying number (e.g., passport).

Changes or Updates to Reported Information

If there is any change to the required information about the company or its beneficial owners in a filed BOI report, the company must file an updated BOI report no later than 30 days after the date on which the change occurred. The same 30-day timeline applies to changes in information submitted by an individual in order to obtain a FinCEN identifier. However, a reporting company is not required to file an updated report for any changes to previously reported personal information about a company applicant.

If an inaccuracy is identified in a BOI report that a company filed, the company must correct it no later than 30 days after the date the company became aware of the inaccuracy or had reason to know of it. This includes any inaccuracy in the required information provided about the company, its beneficial owners, or its company applicants. The same 30-day timeline applies to inaccuracies in information submitted by an individual in order to obtain a FinCEN identifier.

If a company filed a BOI report and later qualifies for an exemption from the reporting requirements, the company should file an updated BOI report to indicate that it is newly exempt from the reporting requirements.

Penalties For Non-Compliance

Reporting violations, such as false reporting or the failure to report, can result in civil or criminal penalties for both a Reporting Company and certain individuals affiliated with it. As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. That person may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.

This article is written for informational purposes. It is not intended to be legal advice and does not establish an attorney-client relationship.

References:

You can view the Final Rule here: Beneficial Ownership Information

Corporate Transparency Act: 31 U.S.C. §5336 (Beneficial ownership information reporting requirements)

31 CFR §1010.380 (excerpt from Beneficial Ownership information Reporting Requirements Final Rule)

BOI Small Compliance Guide

Recently, the State Bar of California Standing Committee on Professional Responsibility and Conduct (COPRAC)* published concerning the ethical duties owed by an interviewing lawyer and his or her law firm to a prospective client. These duties are addressed in Rule 1.18 of the California Rules of Professional Conduct.

When a person is a prospective client within the meaning of rule 1.18(a), the interviewing lawyer owes the prospective client the same duty of confidentiality pursuant to rules 1.6 and 1.9 even though no lawyer-client relationship thereafter ensues. (Rule 1.18(a)). The lawyer may not use or disclose such information without the prospective client’s informed written consent. (Rule 1.18(b), Rule(a)). This is so even if the information would be material to the representation of an existing client of the lawyer or the lawyer’s law firm.

An interviewing lawyer who receives material confidential information from a prospective client is prohibited from accepting representation materially adverse to the prospective client in the same or a substantially related matter. This prohibition extends to members of the lawyer’s law firm as well. These prohibitions may not apply if the client has provided informed, written consent either before the interview or after. Additionally, such prohibition can be avoided as to the lawyer’s law firm if the lawyer and his or her firm complied with Rule 1.18(d) which provides:

A significant aspect of the Opinion is its discussion of the “reasonable measures” that are contemplated under Rule 1.18(d). The Opinion explains those measures are only those that are necessary to determine whether to represent a prospective client as well as whether the proposed representation was ethically proper and economically acceptable. This may include:

• Information as to whether the client’s position is tenable;
• Information relating to the client’s reputation;
• Information relating to the client’s financial condition;
• The merits of the claim; and
• The predicted range of recoveries.

This opinion discusses different scenarios that may arise when a lawyer has conducted an interview with a prospective client and the law firm is not engaged by the prospective client. Each scenario illustrates the conditions that may or may not permit an ethical screen in the absence of an informed consent, governed by rule 1.18. Although this opinion is not binding, it should provide useful guidance to assure compliance with the ethical duties owed to a prospective client.

*Marshall Whitney is a former member of CORPAC. To read the full opinion click here.

Attention All Employers!

Please note the below changes to California minimum wage and overtime requirements coming into effect in 2021. As always, the WTJ team is available for any and all employment questions as you prepare to enter a new (and hopefully better) year.

*The overtime limit for small ag employers (25 or fewer employees) remains at 10 hours in a work day and 60 hours in a work week for 2021. However, effective January 1, 2022, small ag employers will be required to pay overtime for work days exceeding 9.5 hours or work weeks exceeding 55 hours.

From its inception, Whitney, Thompson & Jeffcoach has been a women-owned firm. Fresno business litigation attorneys Mandy Jeffcoach, Niki Cunningham, Marshall Whitney, and Tim Thompson joined together in 2018 with the intention of building a firm dedicated to serving clients with the highest quality of legal representation, while still maintaining a culture that encourages teamwork and a healthy work-life balance.

Two years later, the WTJ team has added a new owner, Carl Refuerzo, and grown from four to 15 attorneys who share the same core values from the start: teamwork, excellence, collaboration, integrity, and dedication. Being a majority-woman-owned business and emphasizing balance and flexibility has remained a priority for the leadership at WTJ, particularly as the community encounters and overcomes unprecedented challenges.

The women at WTJ continue to excel in 2020, despite unusual circumstances and unforeseen challenges. Mandy Jeffcoach was named on the list of 2020 Top 50 Women Super Lawyers, and Niki Cunningham was selected as a 2020 Rising Star. Partners Courtney McKeever and Kristi Marshall were also included on the 2020 Rising Stars list. WTJ’s emphasis on collaboration has created an environment of excellence, and the female leaders at the firm consistently uphold this standard.

Insights from Mandy Jeffcoach

One of the biggest challenges females face is balance—particularly now, as we adjust to online schooling and the many other demands of our “new normal.” Females are generally expected to succeed in all things—family, business, friends, community involvement—the list goes on. However, we cannot be everywhere at once. It is necessary now, more than ever before, to find balance and accept that you may not be able to go to every school function or community event (when they resume again) or take every case presented to you. I will admit that as a leader, as an attorney, and as a mom, this has been a very real, personal struggle for me.

Fortunately, my partners and I have always agreed that finding a balance and making family a priority is key to long-term success. When we started WTJ, we made sure to set up our system so that people can work remotely. We also focused on making sure people knew that “one size does not fit all”—our team may need to work different schedules, have unique arrangements, or step away unexpectedly, and we strive to accommodate them and help them succeed.

My partners at WTJ continue to be my most significant professional influence. I have been blessed to work with many of my partners for my entire career. They taught me not only how to be a lawyer, but also how to be a leader. They were always there to answer any question I may have, introduce me to clients and members of the community at events, celebrate my victories, and “brainstorm” my failures so we could make sure they did not happen again. They also showed me the importance of teamwork and how, without a team, you will inevitably fail. Law is organic and always changing, and without a team to work with and bounce ideas off of, I believe there is no growth. That is why our company focuses so much on teamwork—every single member of our team is critical to our clients’ success.

Leadership is likely going to look different in the years to come, as we are asked to adapt to new challenges and solve unique problems. It is going to require flexibility and a willingness to approach things in different ways. The nation is currently in crisis, and it will require leaders who are flexible and willing to see both sides of every issue for things to improve. A true leader understands that there is no right or wrong answer—the best response is usually somewhere in the middle.

I hope that the push for transparency in business will influence people to realize that open communication is crucial. Most issues can be resolved if people just sit down, recognize all sides, and make a decision together. As Albert Einstein said, “The measure of intelligence is the ability to change.” Leadership, particularly as we embark on this journey in our “new reality,” will undoubtedly require a fundamental change in how we address issues and resolve them. I am grateful for my fellow leaders at WTJ, who never shy away from change. When you have a great team, anything is possible.

Insights from Niki Cunningham

As a business owner, attorney, and mother, I have learned so much about leadership, and yet I still learn new things every day. I am grateful for the opportunity to continue to grow and become an even better leader for my partners at WTJ, our clients, and my family. Leadership is hard work, and you will stumble and make mistakes—but that is part of the process. Some of my greatest learning moments have been in my failures. The lessons I carry with me help me every day, and I hope they can help other aspiring leaders, as well.

Surround yourself with good people, and never be afraid to push the envelope. In my experience, taking the easy road is not always the best road. Without good people in your everyday environment, whether that is coworkers, clients, friends, or family, you will not succeed. If there are things that you want to change, push the envelope and see if you can change them. If you realize that things cannot change, do not be afraid to say, “This is not working for me,” and move on. Change can be terrifying, but without it, growth is impossible.

All leaders have different traits and experiences they bring to the table, but three characteristics resonate for me: listen, be patient and treat people the way you want to be treated.

Listen. One of my favorite quotes is, “Listen to understand, not to respond.” With our fast-paced society, many people simply want to get a response out and fail to listen to what the issue really is. A good leader is able to listen and understand, then respond. Something that may seem trivial to you may mean a lot to someone else, and effective listening ensures that people who are important to you always feel heard and understood.

Be patient. Being a leader requires you to slow down and see the bigger picture. A quick reaction can be disastrous if it is solely driven by emotion. Part of being a leader is stepping back and looking at the issue from all angles, reflecting on the potential consequences, and then making a decision. Patience is also part of the mentoring process, as someone new to the industry is not going to have the institutional knowledge others may have. If you do not take the time to teach them what they need to know, they will never succeed.

Treat people the way you want to be treated. I learned this lesson as a child and it has carried with me throughout life. You are bound to encounter people in life that may make decisions that you disagree with, for a variety of reasons. However, that does not necessarily make the decision wrong. Even if the decision was wrong, having empathy for that person and making it known that mistakes are okay will go a lot further than making someone feel bad. (Remember, leaders make mistakes, too!) Above all, it is critical to treat people with respect, listen to them, and recognize that different opinions make our community great.

Understanding Families First Coronavirus Response Act

In response to the COVID19 outbreak, the federal government has passed emergency legislation known as the Families First Coronavirus Response Act (the “Act”), enacted on March 18, 2020. The Act includes, among other things, an emergency expansion of the Family Medical Leave Act (“FMLA”) and paid sick leave, along with an employer tax credit. Whitney Thompson & Jeffcoach, LLC has provided the below summary in order to help our clients navigate the requirements of the Act.

Emergency Family and Medical Leave Expansion Act

The Act amends the FMLA to expand employee eligibility, employer threshold and the definition of a qualifying need.  The amended sections are referred to as the Emergency Family and Medical Leave Expansion Act (“EFMLEA”).

Employee Eligibility and Employer Threshold

All private employers with fewer than 500 employees must allow any employee who has been employed for at least 30 calendar days with a “qualifying need” under the Act, defined below, to take EFMLEA leave. Employees taking EFMLEA leave are entitled to the same 12 weeks of job protected leave provided under FMLA. The first 10 days of EFMLEA leave may be unpaid leave, while the remainder must be paid at no less than two-thirds of the employee’s regular rate of pay. Employers may not require an employee to substitute any accrued paid leave for the unpaid leave. However, employees may choose to use accrued vacation days, sick leave, personal leave, or other available paid leave for unpaid time off. While the Act requires employees taking paid EFMLEA leave receive at least two-thirds of the their regular rate of pay, the Act also states that such paid leave shall not exceed $200 per day and $10,000 in the aggregate. At this time, it is unclear how those two provisions will be reconciled.

The Secretary of Labor has the authority to exempt small businesses with fewer than 50 employees from the requirements of the EFMLEA “when the imposition of such requirements would jeopardize the viability of the business as a going concern.” It is not clear at this time how the Secretary of Labor will apply the exemption.

Qualifying Need for EFMLEA Leave

An employee may take EFMLEA leave when he or she is unable to work (or telework) because they must care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency.

Restoration of Employment Position

Employers with 25 or more employees will have the same obligation to restore the employee to his or her position or a position equivalent to that held prior to commencing EFMLEA leave. Subject to certain requirements, employers with fewer than 25 employees are generally excluded from this requirement if the employee’s position no longer exists following the EFMLEA leave as a result of COVID19.

Emergency Paid Sick Leave Act

The Act also provides for an emergency expansion of paid sick leave requirements, referred to as the Emergency Paid Sick Leave Act (the “EPSLA”). Similar to EFMLEA, all private employers with less than 500 employees that are engaged in commerce shall be subject to the EPSLA.

Under EPSLA an employer shall provide each employee (regardless of how long that employee has worked for employer) with additional paid sick time if the employee is unable to work (or tele work) because the employee: (1) is subject to a government quarantine or a COVID19 isolation order; (2)  has been advised by a health care provider to self-quarantine due to concerns related to COVID19; (3) is experiencing symptoms of COVID19 and seeking a medical diagnosis; (4) is caring for an individual who is subject to a COVID19 isolation order or has been advised as described in paragraph (2); (5) is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the child care provider of such son or daughter is unavailable, due to COVID–19 precautions; (6) is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

The paid sick time obligations set forth in the EPSLA shall begin on April 2, 2020 and shall end on December 31, 2020. At this time, it is unclear how EPLSA leave shall be treated in conjunction with EFMLEA leave. However, an employer may not require an employee to use the accrued sick time, or any other paid leave provided by the employer to the employee, before using the additional sick time provided under EPSLA. Any additional paid sick time under EPSLA shall not carry over from 1 year to the next and shall not be payable upon employee’s separation from employment.

Duration and Payment of Paid Sick Time

Full-time employees shall receive 80 hours of paid sick leave. Part-time employees shall receive sick time equal to the number of hours that employee works, on average, over a 2-week period. California employers will be required to pay sick time at the employee’s regular rate of pay.  However, again, there is an apparent cap on the wages an employer must pay under EPSLA at $511 per day ($5,110 in the aggregate) for a use described above in items (1), (2), or (3); and $200 per day ($2,000 in the aggregate) for a use described above in items (4), (5), or (6).

Notice Requirements

The EPSLA requires that each employer post a notice of EPSLA requirements in conspicuous places on employer’s premises. Within 7 days of the enactment of the Act, the Secretary of Labor shall prepare and make publicly available a template of a notice that meets the employer’s EPSLA notice requirements.

Employer Tax Credit for Expanded Paid Sick and Paid Family Leave

Through the end of 2020, the Act provides a refundable tax credit for employers equal to 100% of the EPSLA or EFMLEA wages paid by employers for each calendar quarter. The credits are subject to limitations and any credit claimed will increase the gross income of the employer for the taxable year.

WTJ remains committed to its clients and community during this uncertain time. Our team is closely monitoring the regulations and we will do our best to provide timely updates. Read the full Act here.

by Kristi Marshall

With all of the evolving news surrounding the novel coronavirus, we wanted to take a moment and let our business clients know there are some silver linings in an Executive Order that was signed Monday, March 16, 2020, by Governor Newsom. While many news articles have solely described it as an Order to protect residents who are renting from being evicted during the COVID-19 emergency, there are several protections for businesses, as well. Here are some of the highlights:

1. Local Governments can use their police powers to limit residential and commercial evictions for non-payment of rent due to loss of wages and/or business income relating to the COVID-19 pandemic and/or restrictions that relate to the pandemic;
2. Judicial Foreclosures and Unlawful Detainer actions are suspended until May 31, 2020 in those areas where Local Government has enacted this Order. Note, to protect landlords, back-due rent owed and incurred during this time period must be paid.
3. Financial institutions holding home or commercial mortgages are to implement an immediate moratorium on foreclosure actions where the non-payment arises out of a substantial decrease in household or business income relating to the COVID-19 pandemic or regulations by any government (local, state or federal) relating to the pandemic.

While it is not yet clear how this will be applied locally, the State is trying to ensure businesses are able to bounce back after being closed and commercial landlords, in return, are able to postpone foreclosure actions and hold onto their properties in the event commercial tenants are unable to pay. Business owners who lose income should also be protected from losing their residential homes at this time in the event Local Governments adopt this Executive Order.

We realize this is a stressful time for businesses and the regulations are changing by the day, so if we can be of any help during this time, we are happy to answer questions. To read the full Executive Order, click here.

Whitney, Thompson & Jeffcoach is always proud to share the recent accomplishments of our firm, especially when they pertain to our work and expertise. See some of our most recent trial and settlement wins below.

Practice Area: Fraud/Financial Elder Abuse

Date: March 2019

Attorneys: Tim Thompson & Niki Cunningham

Description: Tim and Niki recently prevailed in a six-day jury trial and received a 12-0 plaintiff’s verdict on claims for breach of contract, fraud, and financial elder abuse. Tim and Niki represented an 89-year-old man who had been taken advantage of by a family friend through various loans and real estate transactions. The jury ultimately awarded Tim and Niki’s client more than $455,000, which included an award of $85,000 in punitive damages.

Practice Area: Estate/Trust Litigation

Date: May 2018

Attorneys: Tim Thompson & Niki Cunningham

Description: Tim and Niki recently prevailed in a trust dispute action with more than $2M in assets. A disinherited child sought to set aside the trust on the grounds of undue influence. Tim and Niki successfully defended the primary beneficiary of the trust. At trial, after the challenger presented its case in chief, the court granted our motion for judgment and found that there was no evidence of undue influence by our client, and the trust was upheld.