After many years of clouded darkness, the Federal Government had a “ah-ha moment“—that is, a “moment of clarity“—resulting in the new Federal Corporate Transparency Act (“CTA“).
We can almost hear the think-tank thinking; to wit:
“Wait, wait, wait. Wait just a minute, Team…Lets just step back and think about this. Do I have this about right? Not perfect, but close enough?
“Each state creates these fictional corporate entity creatures, based upon each state’s own individual legal standards. Then federal law treats these creatures just like human beings, and then federal law effectively grants these creatures full faith and credit ‘as if’ human beings. And the states in our federalist system arrogantly advertise that the details of these fictional creatures will be kept a secret, so that the public does not know who owns or controls these state-created pervasively active social creatures, that are also acting socially with all sorts of other benefits that human beings don’t get if they act in society….
“And we are trying to fight crime and international crime against American Society for the good of sustaining America. And if a human being acted in crimes, society could generally witness the human action, but if these entity creatures do it, then it’s hidden from view and often so complex and commingled by legal construct—being created by highly-paid lawyers who are all doctors of law—that we can’t get our arms around it or make sense of it.
“And the legal structure is permitting this?
“Do I have that right, that the law is creating these entities for the purported good of society and then some of those entities are able to do things bad for society. Yet, we are helpless to resolve by our laws the very issue that we’ve created by our laws, making us victims of ourselves? Have we lost our minds?“
Let us get something basic out of the way, fast. In the United States of America, there is an inherent right to earn a living. Some might say that god (or the gods) give human beings the right to produce and to consume—thereby making it a natural right—and all the more for life in America. [1, 2]
But, alas, such as it is, that natural right is only the right to act as a human being, as a proprietorship or perhaps a partnership, but not as a fictitiously created corporation, LLC, or other state-created fictional entity creature where the rights arise from legislative artificially contrived grants.
The privilege of incorporating is limited to those rights that the law grants and recognizes. No more, no less. [3, 4, 5, 6] It might be said that natural rights are “all except” and artificial rights are “none except.” [18]
A corporation is not a human being, and it has no natural rights. Any assertion that a fictitious paper body must be treated on the same legal standard as a natural human being is foolish. And, if it was ever appropriate as first conceived, the time has passed by changed social circumstance.
The corporate creature has now grown and evolved into a complex piecemeal monstrosity, by increments over time, well beyond the beauty of its original simple creative idea. Secret operations, secret ownership, and secret control, are not part of the rightful public policy of a corporation.
Kings gave the corporate charter by exceptive particulars. [*16] What the king gives, the king can take away. [7, 8] What the law gives, the law can take away. A bundle of rights and privileges is accepted as offered, benefits with burdens. [9]
The creature must serve the common weal. If the law cannot control the creature corporate body that it creates—by the wisdom of necessary checks and balances—then the creature corporation is a rogue, a horrific monster.
State corporations are monstrous fictional beasts that overtly contradict the natural rules of humanity; to wit: no actor owner liability, a conduit to socialize in secret, secret control by legions of interests, special taxation, divisibility of self, and even perpetuity of life. [*6] Creative and purposeful if controlled, but corporations still violate the laws of nature. Indeed, even theists will agree: Corporations don’t go to heaven.
Doctors of medicine are indoctrinated with their monstrous creature drugs, and no less for doctors of law who are indoctrinated with their monstrous creature corporations. Yes, Doctor Frankenstein was a fool for his bolt-necked creature, and no less for lawyers for their own do-it-all specter-actor creatures. [27]
States do not get blank checks by full faith and credit or comity for each other, and no less for federal interstate commerce. Corporations are interstate commerce—the ways and the means—and all the industry intellect and educational degrees notwithstanding, only a fool would say otherwise. [19, 20]
By the light of check-and-balance insight, the new Federal Corporate Transparency Act went into effect on January 1, 2024, requiring, as a general rule, each state-created entity to make written admissions of ownership and control disclosures with the federal government. [Attorneys reading this paragraph will stick on the word “admission,” which we’ll get to soon.]
This year, the deadline is year-end if the entity was created last year or earlier. The deadline of three months for an entity created this year. And next year and thereafter the deadline is one month after creation of the entity.
As an advocate for entrepreneurship for more than 35 years, and as corporate counsel for countless entrepreneurial companies, I have already filed a volume of these CTA disclosures. Yes, it is a small added cost of compliance for business, and I neither personally nor professionally gravitate to regulation and compliance costs, but I prefer that over legal dysfunction and hypocrisy.
For the CTA, notwithstanding the partial injunctions and any current technical flaws, I will suggest that the federal government has gotten it right, or will get it right, because the federal government is right in principle. The evolved corporate creature must be controlled for new evolved economies. [13.1]
Moreover, commercial culture is trending to transparency [25], and, sooner or later, the federal mechanism will sustain, even if reduced to such mechanisms as no defense under federal law shall recognize state law corporate limited liability for owners or operators, except if the CTA filing is made; or, no application for a federal trademark, copyright or patent may be filed except with CTA compliance as a precondition; or perhaps, even more generally that no application can be made to the federal government in the name of a corporation without completing the CTA, which is not a matter of equal protection because the nature of a human being and a fictitious corporate paper creature are neither the same nor even similar in corporeal existence, and only a fool or an idiot would say so or make it so. Does interstate commerce, by federalism, require the recognition, the burden and the management of at least 50 different state-created monstrosities?
Sooner or later, the federal government will win, although, for the moment, clever lawyers may have it entangled in legal argument by some form of old precedent or hidden premise that a corporation is a human being.
The freemen of America did not wait till usurped power had strengthened itself by exercise and entangled the question in precedents. … We revere this lesson too much … to forget it.
James Madison (Father of the U.S. Constitution), “Memorial and Remonstrance,” Rives and Fendall, Letters and Other Writings of James Madison, 1:163 [17, 21, 22, 23, 12, 24]
And let us be honest with ourselves. States are so desperate and competitive for money that they arrogantly market corporate secrecy in self-interest, under the sweet guise of a kiss of helping business [13.2], but with blatant disregard for the health and life of the larger American body, for money. Indeed, the states market secrecy along with all the other evolved plethora of “magic” benefits for a crafty doctor of law to sew together as the creature’s divine creator. [*16] It’s the hypocrisy of money-driven policy. Whether or not secrecy should even be permitted by full faith and credit, comity, as a matter of federal public policy social interest, or by police power, being conceptually embodied and subsumed into the interstate commerce clause, is yet a matter to resolve.
Now, sure, as a J.D. Doctor of Law, I love my monster, particularly having created it in my own image. In fact, I admit that I take pride in creating as powerful a monster as I can create. That is what I do. That is the purpose of my entire training and existence as an attorney. Yet, as an American, I know what the creature is and I know what it can do, because I created it. I know that monster, because I know myself. [10] Corporations need to be controlled, because I need to be controlled. [11, *12] Only a fool does not know self-inclination. [26]
Mankind soon learn to make interested uses of every right and power which they possess, or may assume….Nor should our assembly be deluded by the integrity of their own purposes, and conclude that these unlimited powers will never be abused, because themselves are not disposed to abuse them. They should look forward to a time, and that not a distant one, when a corruption in this, as in the country from which we derive our origin, will have seized the heads of government, and be spread by them through the body of the people; when they will purchase the voices of the people, and make them pay the price.
Human nature is the same on every side of the Atlantic, and will be alike influenced by the same causes. The time to guard against corruption and tyranny, is before they shall have gotten hold of us. It is better to keep the wolf out of the fold, than to trust to drawing his teeth and talons after he shall have entered.
Thomas Jefferson (Father of the Declaration of Independence), Notes on the State of Virginia xiii. Man cannot serve two masters. One must be first. So, I choose America, First. [13.3, *10] America must endure the test.
For most of us, as corporate legal counsel, this new law is simply a new compliance issue. It happens all the time for us as lawyers. We adapt, because the law is necessarily as dynamic as society. Society evolves and so does the law.
But we take notice that the law not only evolves for new social contexts, but also for new capabilities in enforcement. Data warehousing with AI data correlation are providing new opportunities for focusing enforcement efforts efficiently. “Hmmm,” says FinCEN’s AI engine, “John owns a piece of this company, and John owns a piece of that company, and John’s wife controls that company, and that entity does trucking, and that entity does shipping, and that entity…, and, therefore, this is an underworld conglomeration.“
Yes, there are interesting legal wranglings. And, yes, there is some old precedent that these paper creatures get the same benefits as a human being, making the creature to be the master over its maker. [*12, 14, 15, *16] And, yes, there are contexts that cause legal head-scratching, particularly with inquiries to FinCEN being fielded by automated AI bots.
But let us put all that aside for a moment. Let us just step back for a moment and think about the implications of this new law. Watch how clever is the application of this new law.
Let’s say you are Dick Tracy and you’re reviewing a shipping conglomerate corporation, for purposes here fictionally named “CRIMINALCORP, Ltd.,” that operates, directly or indirectly, under common “criminal” ownership or control.
Generally, the CTA says CRIMINALCORP must “disclose” ownership and decisional control using a method of drill-down (often already used for casino license disclosures) until the disclosure gets to human beings.
If the filing is not made, there is a violation. If the filing is not made correctly, there is a violation. Therefore, the filing must be made, and correctly.
Thusly, the most interesting part of the new law is if CRIMINALCORP actually makes a correct filing so as not to violate the law. To make this filing, the organization must “sign-off” on an admission of who owns the criminal entity and who is in charge of it.
The new law commands identification of the owners and operators of their corporate organizations, even though there is no systemic claim of criminality. The law is not accusatory, but, of course, a guilty conscience needs no accuser. Without the CTA, the federal government needs probable cause or a subpoena to move forward, and then must manage complexities and legal defenses.
The CTA prevents corporate creatures from playing it both ways, by regulating transparency through the legislative privilege of existence. Limited liability is one thing, but legally sourced and created veiled secrecy of owners and operators is quite something else, the law foolishly defeating itself. [*16, *25]
Systemically asking for identity is not a criminal accusation and serves exactly the same principle that requests organizational identification for the purpose of attributing responsibility if required in due course for the benefit of a privilege. Does not the power to regulate interstate commerce entitle the federal government to know what human beings are acting through the paper secret veil of the same fictitious inhuman construct that requests the federal government to recognize and to acknowledge it as a ways and means? [*25]
Moreover, what rights or recognitions, if any, the resultant corporation may be granted by law is a different question than what rights human beings are entitled to so as to become owners or operators of the resultant corporation. [*5, 6,*17]
The CTA gives information by admission, with the creature being required to unbolt its own head and to put it on a platter for the United States Government. So simple, so clever. It’s almost poetry, if not poetic justice.
If the admission made in the disclosure is actually true, then the federal government then knows exactly who to contact to grant immunity to take down the entire organization. Alas, what’s a criminal organization to do? Who will get disclosed? Who will take the fall? Who can it trust? On the scale of social virtue, the Corporate Transparency Act tests trust, if not forthrightness. [*25],
The CTA is a masterstroke in legal benefit and burden, if not bringing the entire monstrous veiled fictitious paper construct back to basic humanity. [*9]
In fact, we might even say that the human beings “cleaning up” their internal corporate structure in order to comply with the CTA aids in preventing later owner and operator misunderstandings and court cases that clog the federal and state legal systems. Indeed, it does not serve the common weal to have unnatural privileged fictitious creatures operating in a manner that is quasi-legally amorphous and not readily legally accessible by the legal framework that is asked to recognize it. Of course, subject to penalty, if the corporation does not touch federal commerce, acting intra-state only, and completely within the bounds of one state, and partaking of no federal application or commerce in the corporate name, then an intra-state exemption may be applicable.
I will suggest that the CTA is an infrastructure paradigm shift in corporate responsibility and transparency, and perhaps the most significant and important change to commercial law in almost 100 years, since the Securities and Exchange Acts, and just as worthy.
Indeed, the transparency requirement should have always been there in the first place, in consideration for the grant of the corporate charter at creation. It is unquestionable that the states could do it as a condition of the statutory charter, but states refuse to do it by competitive money-driven self-interest.
If the states refuse to check and balance before or with the fact, then the federal government must do it after the fact. But it must needs be. [*16]
Yes, beauty is in the eye of the beholder. And, all that said, even for this, we recognize that each human being presents a risk, each creature presents a risk, and no less each regulation; to wit:
If Men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and the next place, oblige it to control itself.
James Madison, Federalist Papers, No. 51.
“Homo est dominus legis, lex non est domini hominis.“*
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[1] The Reason Why Political and Economic Systems Fail; The Executive Summary [#GRZ_145]
[3] He Who Feeds Us Enslaves Us – The Business of Aesop™ No. 64 – The Dog and the Wolf [#GRZ_42]
[6] The History of the Decline and Fall of the American Hegemony—Chapter 6 Excerpt—Responsibility [#GRZ_180]
[7] Socrates: What the World Gives, The World Can Take Away
[8] The Proseuché (The Prayer of Socrates) Ch. X-Finale [#GRZ_156]
[10] The Lincoln Leadership Dilemma; Or, The Primary Objective [#GRZ_176]
[11] Why the Walt Disney Company is the Most Dangerous Company in the World [#GRZ_146]
[13] ONE®: The LinkedIn Reference Set [#GRZ_59]: 13.1 ONE: 799 [T9:17, R2:22, L5:37] (“New Wineskins“); 13.2 ONE: 2632 [T26:50, L22:48] (“Betray With A Kiss“); 13.3 ONE: 582 [T6:24] (“Serve Two Masters“)
[16] The History of the Decline and Fall of the American Hegemony—Chapter 6 Excerpt—Responsibility [#GRZ_180]
[18] Pro-Life or Pro-Choice? Chapter 2, Cause and Effect [#GRZ_92]
[19] The Recipe to Make Bud Wiser [Branding, Part I] [#GRZ_142]
[20] Marlboro Man; You’ve Come a Long Way, Baby. [Branding, Part II] [#GRZ_143]
[21] The Social Vice Triumvirate™: Jealousy, Envy and Pride [#GRZ_58]
[23] THE JUDICIAL OATH: I DO SOLEMNLY SWEAR AND AFFIRM…; Or, How Wrong Can It Get? [GRZ_131_1]
[26] Sorry, Socrates. Or, The “Apology” of Socrates [#GRZ_60]
[27] I Am Not Brainwashed, And Neither Are You. Maybe. But I Might be Wrong. [#GRZ_165]
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“Homo est dominus legis, lex non est domini hominis.“* (“Man is master of law, the law is not master of man.“), also “Lex homini servit, homo legi non servit.” (“The law serves man, man does not serve the law.“) ~grz
© 2024 Gregg Zegarelli, Esq. Gregg can be contacted through LinkedIn.
The statements or opinions made in this article are solely the author’s own and not representative of any institution regarding which the author is affiliated.
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