Business entities are set to face rigorous federal regulations come January, 2024 affecting the way such companies are established and operated. Roy Oppenheim from Oppenheim Law walks through these looming changes, emphasizing the critical choice between corporation or LLC type, the state of registration, and the need for asset protection, correct tax implications, and accurate setup procedures.
The Federal Database Shift:
In January, a significant shift awaits business entities as the federal government rolls out an extensive database. This database will aim to capture:
Detailed Information on Business Entities: Any newly formed LLC or corporation will have a 30-day window to register, while existing entities will have a year.
Transparency on Ownership Structure: For complex structures where an LLC is owned by another LLC , the federal government aims to unravel and understand the real controllers of these businesses.
Active Participation Identification: Beyond shareholders, even non-owners like attorneys or CFOs with significant roles or check-writing authority in the business will have to register.
The Need for Expert Consultation:
While many rely on accountants for setting up companies, it’s essential to remember:
Asset Protection: Accountants might focus on tax benefits while setting up a business entity, but asset protection is crucial. For instance, in Florida, a single-member LLC offers minimal asset protection, making alternatives like S-corps or C-corps more favorable.
Tax Implications: While a single-member LLC might be efficient tax-wise, they might entail additional costs, such as extra social security taxes.
Customization Based on Individual Needs:
Business needs and priorities differ. While some might prioritize asset protection, others might have substantial insurance or no assets, rendering asset protection redundant. Hence, the business structure should align with individual requirements.
Conclusion:
Navigating the waters of business formation is set to become more intricate with the federal regulations. It’s crucial for businesses to not only understand these regulations but also consult legal experts to ensure their foundation is solid and compliant.