Entity Management Software Becomes Your Single Source of Truth

Some industries are ripe for modern technology, while others are slow to adapt to innovative solutions. Broadly speaking, the healthcare sector, hospitality sector, construction industry, and agriculture industry are some of the largest sectors of the economy with the least adoption rates of modern technology.

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You could argue that the legal community, while not quite as rudimentary as some of those other sectors, also has a general case of technophobia. Law firms have relied on traditional workflows involving pen and paper or Microsoft Office files to manage client information. To this day, many firms still adhere to the old ways, potentially placing themselves at a competitive disadvantage.

It begs the question: what lies at the root of these technophobic fears, and how can they be overcome? What do legal professionals need to understand about how technology can simplify their lives so that it increases adoption rates? Let’s look into that and outline answers to those pressing questions.

Legal teams understand legal technology is a growing trend

According to the Wolters Kluwer Future Ready Lawyer Survey, which was disseminated to 751 professionals across North America and Europe, the top three trends cited by respondents are:

1. Growing importance of legal technology in legal workflows
2. Managing increasingly complex information
3. Adapting to new or evolving client needs

The findings show that 79% of survey participants cited these three key areas as the biggest trends impacting the legal industry. At the same time, only 36% of respondents believe their firm or organization is prepared to address these growing trends.

Growing client demand for tech-powered firms

In the same study, participants were asked how they evaluate a potential partnering firm’s use of legal technology, and what impact that has on their decision to enter into business with the firm.

• In 2022, up to 70% of respondents said that how a prospective firm uses legal technology influences whether they enter into a working relationship with that firm.
• The response rate is up from 41% in 2020 and 52% in 2021.
• By 2025, client interest in legal technology is expected to reach 97%.

This particular finding corresponds with other industry studies that show the influence of technology on business operations. Since the COVID-19 pandemic, 77% of business owners admit they want more flexible options to access important files.

These findings should serve as a wake-up call for technophobic law firms. Clients want to work with legal professionals who support their desire for flexible meetings and file access management. Failing to incorporate innovative solutions could result in lost business and missed opportunities to boost Legal Recurring Revenue.

Why are firms reluctant to embrace legal technology

Broadly speaking, companies in most industries struggle to embrace technology out of fear that it will corrupt their use of data. Data lies at the heart of any effective business strategy. However, if that data isn’t clean or organized, it makes it difficult to interpret any insights and feed a business growth strategy.

When looking specifically at the adoption of legal technology, here are the three main reasons law firms are resistant to modern technology.

Mistaken idea that managing legal technology is very time consuming

In the legal community, time really does equate to money. Legal professionals are always looking for ways to increase billable hours so they can boost inbound Legal Recurring Revenue for the firm. As a consequence, many legal minds are under the misguided belief that every minute not used for billable hours is a sunk cost.

Unfortunately, legal teams that fall into this line of thinking risk leaving their operations less efficient and productive than they otherwise could be with legal technology. The amount of time spent on administrative or clerical tasks remains stubbornly high without an innovative solution to streamline all these laborious tasks.

Legal technology is costly and deemed too expensive for the budget

This is the biggest reason why firms refuse to adopt modern legal technology. Without a tangible economic benefit from investing in legal technology, firms don’t see the value in carving out portions of their budget for such investments.

When legal teams fall into this line of thinking, they forget one of the fundamental rules of any business: the cost of doing business. Any company must invest in certain expenditures to maintain and improve operations. Legal technology is one of those expenditures that pays off in the form of time savings and efficient workflows.

Concerns that legal technology will slow things down and create lags

Similar to the time efficiency argument, some law firms believe that legal technology will slow down their rate of operations. They worry that there will be lags in productivity, diminishing the firm’s potential for growth.

The counterargument here is that legal technology is designed to introduce efficiencies to established workflows. Rather than slow things down, legal technology actually speeds things up by reducing the time professionals spend on non-revenue generating tasks.

Why entity management software is the secret to overcoming legal technophobia

Having debunked misguided beliefs about legal technology, what is the optimal solution to improve legal workflows and overcome skeptical feelings towards legal technology? The answer is entity management software, which is designed by legal minds for legal minds.

Entity management software is a form of legal technology developed by legal professionals who represent law firms, legal departments, general counsel, and compliance professionals. It simplifies the complex aspects of entity management and streamlines operations into a workflow that’s efficient, relatable, and even fun.

Entity management software enables legal teams to create one centralized location for all client minute book records. The process of inputting, filing, sorting, and tagging minute book data is complete in a matter of minutes. This is in stark contrast to the time consuming administrative tasks conducted outside of an entity management system. Investing in entity management solutions will help your legal team, particularly your paralegals avoid feelings of burnout.
Teams that use entity management software save invaluable hours on clerical duties that can be reallocated to growing the interests of the firm. It also helps with talent acquisition as many rising legal professionals understand the value of entity management technology. Use your firm’s adoption of entity management systems in your HR strategy. This will encourage the brightest legal minds to join your team and increase Legal Recurring Revenue for your firm.

This piece is a list of suggestions and helpful solutions in order to help us, as a legal community, get through the tumultuous times, and ensure we are in the best possible position when this is all over (it will happen… I swear!).

Here we are. The vast majority of lawyers are working from home, trying to find a sense of normalcy in a world that changes by the hour (sometimes less). I always knew the legal industry would undergo a cataclysmic change, but never in my wildest thoughts did I envision a global pandemic would be the catalyst.

Let’s get one thing clear. There is no single-source rule book for how we, as a profession, undertake our role in the current circumstances. These are uncharted waters and we are all navigating them for the first time. Good luck!

But I firmly believe lawyers are smart and resourceful. They will find ways to provide services to clients and ensure the job gets done.

Even at times when we feel helpless as professionals, there are steps lawyers and law firms can take to ensure our industry makes it through this crisis:

Communicate with your clients: Ensure they are well accommodated. A simple phone call goes a long way to build goodwill. In times of uncertainty, “Hi, how are you?” shows concern and empathy. Find out what kind of support they need and offer your services, if you can.

Communicate with other lawyers: One big (normal) fear we may have is that other lawyers are farther along in their management of this crisis than we are. This can lead to uncertainty, anxiety, paranoia and doubt. Rest assured, every lawyer is feeling the stress and everyone is, to at least some degree, underprepared for a situation like this. Speaking with colleagues will not only help settle your thoughts, but may also introduce you to some novel solutions they have uncovered which can help your practice as well.

Explore what doesn’t work: What PAIN POINTS are you specifically feeling now when it comes to your ability to practice? What is not working and what needs fixing. What really grinds your gears when it comes to your practice? These might not be identified immediately, but over the coming weeks, begin to explore which processes are important and which are dead weight.

Take stock of your processes: Do a little process mapping. How were things done before the current health crisis? How are they done now? What can be improved and what was waste? Process mapping for different parts of your practice can help zero-in on areas that can be improved.

Take advantage of government resources: The federal and provincial governments have been providing capital for businesses and individuals. It is important to inform your clients about what’s available, but also determine if you or your firm is eligible. Find out if you are eligible for the Temporary Wage Subsidy (TWS), the Canada Emergency Wage Subsidy (CEWS), the Canada Emergency Business Account (CEBA) and the Canada Emergency Response Benefit program (CERB).

Don’t be afraid to push the envelope when it comes to novel ways to practice: Remember, above all else your duty is to provide service to your clients (in a safe, ethical and secure manner). Think outside the box and be a trailblazer!

Embrace the quiet: Lawyers are notoriously busy, always working on client deadlines (whether actual or self-imposed). Without a doubt, those times will return, guaranteed! But in the meantime, enjoy working fewer hours. Embrace a 9-5 work routine. Take an extended lunch at the kitchen table. Watch an episode of the Price is Right (it’s good for the soul!).

Take the time to be honest with yourself: Anxiety, nervousness and fear are human emotions. And although we sometimes work superhuman hours, we must find time to cope and express our emotions to ourselves and to others.

As lawyers, we are made to feel we have all the answers all the time. It’s alright to take a little bit of time to find the best approach to provide optimal service to your clients and yourself.

If you remember nothing else, remember Rule # 1: Stay healthy. The rest we can figure out together!

The Corporate Transparency Act (CTA) was enacted on January 1, 2024. The authors of the CTA decreed a mandate that requires all qualifying business entities to submit beneficial ownership information (BOI) reports to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).

Two months later, on March 1, 2024, a US District Judge in Alabama ruled on a case brought before the court by the National Small Business Association (NSBA), an organization representing over 65,000 small business entities across the United States. The judge ruled that the CTA is “unconstitutional” and that lawmakers overstepped their bounds.

What is the purpose of the Corporate Transparency Act?

The CTA is part of a broader government effort to crack down on white-collar crime. US federal agencies and financial institutions annually identify unlawful transferrences of capital through money laundering or corporate sponsorship of international terrorism — actions that, in the government’s opinion, undermine national security.

As a result, the CTA gives FinCEN greater authority and oversight of suspected culprits of these crimes. Qualifying business entities must provide detailed BOI reports to FinCEN, which will store those records in secure databases and use them to monitor suspicious financial activities.

What were the details of the Alabama case?

The NSBA challenged the legal authority of the CTA and took the government to court seeking a summary judgment. Federal District Judge Liles C. Burke in Alabama issued a 53-page opinion about the case, which a Forbes contributing writer dissects in detail.

At the heart of the lawsuit is the fact that legal entities in the United States register with individual states where they choose to operate. The incorporation of those entities is a matter for the states to decide, along with the ability to prosecute those businesses for suspected financial crimes.

The NSBA argued that the CTA gives the federal government’s national security and foreign affairs matters the right to interfere with how individual states regulate businesses. Additionally, they argued that limited liability corporations (LLCs) may engage in interstate commerce, but not all entities pursue these opportunities.

The CTA requires all entities — even those that never cross state jurisdictions — to abide by the federal government’s mandate. Judge Burke ruled these grounds warranted an unconstitutional ruling of the CTA, though the federal government launched an appeal to the Eleventh Circuit.

Who is a beneficial owner under the CTA?

Within the CTA is specific language that defines a beneficial owner. According to the CTA, a beneficial owner is anyone who — directly or indirectly — maintains a 25% ownership interest in a corporate entity. Additionally, a beneficial owner is anyone who — again, directly or indirectly — maintains substantial control over business operations through voting rights.

Shareholders who fit the profile of a beneficial owner must provide their personal information — name, address, and a government-issued identification number — to the entity management department. That data is then processed and submitted to FinCEN as a BOI report.

Are some entities exempt from BOI reporting requirements?

The CTA allows authorities to gather beneficial ownership information from thousands of legal entities. However, FinCEN has detailed 23 types of legal entities that are exempt from the BOI reporting requirements.

Most exemptions revolve around the financial sector in the form of banks, credit unions, venture capital firms, depository institutions, or money services businesses. Government authorities, public utilities, and securities exchanges are also exempt from reporting BOI data to FinCEN.

What does the Alabama case ruling mean for BOI reporting?

So, what does the NSBA case against the Treasury Department mean for the future of BOI reporting requirements? There are two key takeaways from the case.

Firstly, Judge Burke clearly stated in his ruling that the injunction against the CTA only applies to businesses enrolled in the NSBA before March 1, 2024. Businesses that are registered members of the NSBA have a temporary pause on compliance with the CTA while the case is under appeal at the Eleventh Circuit.

For most businesses, the ruling has no impact whatsoever. FinCEN requires BOI reports from entities registered on or after January 1, 2024, within 90 days of receiving their articles of incorporation. Any entities registered before January 1, 2024, have until January 1, 2025, to submit their BOI reports to FinCEN.

How to prepare your BOI reports for FinCEN

While many entities still have several months to submit their BOI reports to remain in compliance with the CTA, it’s best to start gathering that information now. It’s much more effective for your entity management team to have all the information they need well in advance of the deadline to avoid last-minute scrambles and gaps in required data.

Intuitive entity management software can assist your legal and compliance departments with these tasks. Platforms like MinuteBox include pre-built templates and guided widgets that help your teams build detailed reports. The technology saves valuable working time and makes the process of gathering, filing, and securing entity management data quick and painless.

Additionally, you can use the platform’s Corporate Transparency Register to comply with all obligations under the CTA. Here, you can build detailed shareholder ledgers and create a comprehensive list of all beneficial owners with significant controlling interest in the company.

Once the data is in the platform, you can easily create detailed minute book records of all beneficial owners. Since the information is stored in your platform, filing and submitting the BOI reports to FinCEN is a breeze.

Prepare your legal entity for the next step of beneficial ownership reporting. Join the MinuteBox revolution today, and stay ahead of the game while maintaining compliance.