Indiana Business Law Blog

FinCEN Issues Update on Beneficial Ownership Information Reports

December 10, 2024 | Morgan B. Brading

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As we discussed in our prior update, a federal court in Texas has issued a preliminary injunction against the Corporate Transparency Act (CTA) reporting requirement, the Beneficial Ownership Information Report (BOIR). (You may recall that the CTA requires companies created before 2024 to file BOIRs before January 1, 2025; new companies formed in 2024 to file within 90 days of their creation; and new companies formed after 2024 to file within 30 days of their creation.)

The Financial Crimes Enforcement Network (FinCEN) has issued a statement that all reports during the preliminary injunction are considered “voluntary” and there will be no penalty for reporting companies who fail to file during that period. In their statement, FinCEN maintains that they believe the CTA is constitutional and vital in protecting the United States and its citizens from financial and other crimes.

What does this statement mean, if anything, for your small business?

Companies Need Not File Beneficial Ownership Information Reports – at least for now

December 9, 2024 | Morgan B. Brading

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The Corporate Transparency Act (CTA) requires most small business corporations and limited liability companies to file Beneficial Ownership Information Reports (BOI reports or BOIRs) with the Financial Crimes Enforcement Network (FinCEN), a part of the United States Department of Treasury. The purpose of the reports is to give law enforcement information regarding the people who own or control companies that may not otherwise be available to them, primarily for the purpose of investigating money laundering and other financial crimes. For companies that were formed before January 1, 2024, BOIRs are due by January 1, 2025.

At least they were before this week. On December 3, the United States District Court for the Eastern District of Texas in Texas Top Cop Shop, Inc. v. Garland (civil action number 4:24-CV-478) ruled that the CTA is likely unconstitutional and issued a nationwide preliminary injunction prohibiting the enforcement of the BOIR requirement. In doing so, the court wrote, “[R]eporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.”

For several reasons, this is not the last word on the CTA. First, the Government has already appealed the decision to the U.S. Court of Appeals for the Fifth Circuit, which could set aside the preliminary injunction.

Basics of Business Valuation: A Guide for Business Owners in Indiana

October 1, 2024 | Michael R. Smith

iStock-1504303841_optimized-1-300x188 Determining the value of a small business is a critical step for various purposes, including selling the business, merging with another company, or resolving shareholder disputes. Business valuation involves assessing the economic value of a company, and several methods can be used to achieve this. Business valuation is both an art and a science. A proper valuation requires a trained expert, and they are not cheap. The valuation of a small business can run from a few thousand dollars to several tens of thousands of dollars.

Even though a proper appraisal is the wheelhouse of experts, small business owners should understand the fundamental principles. In this article, we’ll explore the basics to help you know what to expect from a valuation.

Why Business Valuation Matters

Anonymous LLCs: A Guide to Understanding Their Benefits and Drawbacks

September 10, 2024 | Michael R. Smith

What is an Anonymous LLC?

suspicious-young-man-peeking-and-looking-at-camera-through-blinds-mistrust-concept-1124692168_726x484-300x200 An anonymous LLC (limited liability company) is a type of business structure in which the public has no access to the owners’ identities. This means that the names of the members (owners) and managers (if any) of the LLC are not listed on records that are available to the public.

Even though the members and managers are anonymous to the public, they are not anonymous to certain government agencies or to law enforcement. For example, the LLC’s tax returns filed with the IRS and other tax authorities list the names of its members. In addition, a new report that became mandatory this year for most LLCs, called a Business Ownership Information Report, discloses the names of most members and managers to the Financial Crimes Enforcement Network or FinCEN. [Update 4/5/2025: After several confusing court decisions and reversals, the last word from FinCEN is that domestic LLCs and other entities will not be required to file Business Ownership Information Reports. Only foreign entitles will be required to file.]

New Federal Reporting Requirement for Business Entities

August 29, 2024 | Michael R. Smith

suspicious-young-man-peeking-and-looking-at-camera-through-blinds-mistrust-concept-1124692168_726x484-300x200 You may have heard of a new reporting requirement that took effect on January 1, 2024, under the federal Corporate Transparency Act (or CTA). The report is called a Business Ownership Information Report (or BOIR). Most limited liability companies (LLCs), corporations, and other types of business entities are now required file a report with the Financial Crimes Information Center (or FinCEN) disclosing the names of the people who, directly or indirectly, own or control the business entity. A wealth of information regarding the CTA and BOIRs is available at the BOIR home page at https://www.FinCEN.gov/boi; the Small Entity Compliance Guide at https://www.FinCEN.gov/boi/small-entity-compliance-guide; and the list of frequently asked questions at https://www.FinCEN.gov/boi-faqs#A_1. Some basic information is provided below.

What is the purpose of the CTA?

The purpose of the Corporate Transparency Act, passed by Congress in 2021 on a bipartisan basis, is to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures. The BOIR provides law enforcement with information that may not otherwise be readily available to them.

New Indiana Statute Regarding Single-Member LLCs

May 12, 2024 | Michael R. Smith

Form of Inventory of Probate Assets On March 13, 2024, the Indiana Governor signed Senate Enrolled Act 18, which, among other things, amends the Indiana Business Flexibility Act with the goal of addressing problems that can arise from the death of the sole member of a limited liability company. The following article is based on our analysis and understanding of SEA 18, particularly Sections 2 and 3.

Basic LLC Principles: Interest versus Membership

Understanding SEA 18 requires an understanding of the difference between LLC interest and membership.

More about Physician Noncompete Agreements

September 4, 2023 | Michael R. Smith

We recently posted an article discussing Senate Bill 417, which revised Indiana’s statute on noncompete agreements between physicians and their employers, Indiana Code 25-22.5-5.5. A physician in northern Indiana may be the first to attempt to use the statute. The case is Lankford v. Lutheran Medical Group, filed in Allen County Commercial Court.

Dr. David Lankford was employed by Lutheran Medical Group, LLC to work at Lutheran Hospital in Fort Wayne as a pediatric intensivist treating patients in its pediatric intensive care unit. In addition to pediatric intensivists, Lutheran employed neonatologists to treat patients in the neonatal intensive care unit and pediatric hospitalists to treat patients elsewhere in the hospital.

According to Dr. Lankford’s complaint, in October 2022, Lutheran eliminated the jobs of the hospitalists and required the intensivists to assume their responsibilities, in addition to their previous responsibilities in the pediatric intensive care unit. In December, Dr. Lankford notified Lutheran that he believed the increase in his responsibilities constituted a breach of his employment contract. He resigned in January 2023.

Who owns a nonprofit corporation?

September 2, 2023 | Michael R. Smith

The answer to that question is remarkably simple but surprising to many: No one owns a nonprofit corporation. To understand why that is so, let’s compare nonprofit corporations to for-profit or business corporations.

Business Corporations

Imagine you buy 100 shares of common stock in a corporation on the New York Stock Exchange. Congratulations! You’re a shareholder. Your 100 shares of stock give you specific economic and noneconomic rights.

Physician Noncompete Agreements in Indiana

June 22, 2023 | Michael R. Smith

A few months ago, we wrote an article about a bill in the Indiana General Assembly, Senate Bill 7, that would essentially ban noncompete agreements[1] between medical doctors and their employers. The General Assembly enacted the bill and Governor Holcomb signed it, but only after considerable revision. The ban was narrowed, but remaining covenants not to compete will be enforceable less often.

Summary

After July 1, 2023:

What to Do with an LLC with No Members

March 5, 2023 | Michael R. Smith

Generally, an Indiana limited liability company that has no members is dissolved. Ind. Code § 23-18-9-1.1(c). (For an interesting case from Alabama involving the dissolution of an LLC for lack of members, see our Indiana Law Blog article, Family Businesses: Succession Planning for LLCs.) Although that provision is in the chapter entitled “Voluntary Dissolution,” it is really not voluntary at all. It is really a statutory dissolution that occurs automatically, and it can be triggered by several different events that result in the dissociation of a sole, or last remaining, member.

There are, however, two exceptions to the statutory dissolution of an LLC with no members. First, the LLC will not be dissolved if the operating agreement provides specifically for the admission of a member after the dissociation of a sole or last remaining member, and a member is actually admitted under that provision within 90 days of the first date the LLC had no members. In our experience, very few operating agreements contain such a provision.

The second exception applies if the reason the LLC has no members is the death of the sole or last remaining member. In that case, the LLC is not dissolved if the operating agreement provides for the member’s personal representative, or the personal representative’s designee, to be admitted as a member and that person is admitted within 90 days of the member’s death. See Ind. Code 23-18-6-5(a)(4). Again, it is safe to say that few operating agreements have such provisions. Moreover, even if one exists, there is a significant possibility that no member will be appointed before the 90 day window closes.

INDIANA BUSINESS LAW BLOG

What does this statement mean, if anything, for your small business?

Why Business Valuation Matters

What is an Anonymous LLC?