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Wealthy & Wise: Everything You Need to Know About The Corporate Transparency Act

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January 22, 2024
Author: NCH

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About the Video

In this episode of Wealthy & Wise, NCH’s Founder and CEO, Cort Christie, alongside NCH’s Corporate Analyst Division Manager and International Speaker, David Vanlandingham, will unpack the complexities of the Corporate Transparency Act (CTA), BOI Report Filing, and delve into how it impacts small business owners.

Prefer to read? A full transcript is provided below.

Cort: Hello and welcome to another edition of Wealthy and Wise. I’m your host, Cork Christy, founder and CEO of NCH. Today, we’re going to be talking about something brand new that just launched for 2024 from our wonderful Department of Treasury of the United States government. And that is, it is a new registry of all existing and future business owners.

Cort: And businesses that have to report information about who is behind the business, where the business is located, who the owners are of the business, and to break it down and to simplify this whole thing for you, I have a very special guest. We have David Van Landingham to explain to us what is this business registry and what’s it called and how do we approach it?

Cort: What do we need to do about it? So with that, David, welcome to the program. Thanks, Court. It’s always great to be here. Yes, and everybody loves the government. And the government’s here to support us, right? Every day of our lives. And now they want something else from us. Tell us what’s going on out there.

David: So, and this has been going on for a long time. So, in 2008, I’ll start there, but there was actions starting before that. But in 2008, Um, this actually started in a different form. There’s been multiple different names over the years that they’ve called this. Uh, the BOI is just the latest version, actually, that went through.

David: And so what’s happening is, is they’re looking to gather information, uh, to reduce nefarious activities, uh, for people that are using LLCs for illicit reasons, what they call bad actors.

Cort: Yeah, and it’s it. What’s interesting about it is, you know, as you mentioned, it’s been going on for years. They tried to get it at the IRS level.

Cort: Then they went and said, that’s not gonna work. We’re gonna go down to the state level and the state’s pushed back years and years ago and said, we’re not gonna all agree and we’re not gonna have an acting legislation legislation. to collect this data because it’s a logical place to store the data is that the secretary of state’s offices, but they couldn’t get the states to agree to this.

Cort: And so ultimately it now ends up in the federal government’s hands. And, you know, on first blush, it’s kind of interesting because it’s under the U S department of treasury. Financial crimes unit. So when you get to the page, you know, it’s talking about fencing, which is the financial crimes division, and they’ve got this new database to make sure that people aren’t, you know, doing things they shouldn’t be doing.

Cort: And so that law enforcement can find individuals. And I think from a more stressful perspective, that is, that’s the reality of it. But on another level, it’s just a database of information that is Not available to just anyone. It’s really only available to law enforcement. Is that right?

David: That’s correct as much as you want to trust law enforcement not having a data breach, right?

David: So it is and a lot of people kind of panicked initially when they heard about this this does not take away the privacy that would you know, we know so in an LLC exists, so You’re still going to have that level of privacy at the public level, and then what happens basically is that the law enforcement, uh, independent law enforcement agencies at state level can request access to this information as well, but it is going to be on a federal database.

Cort: You know what’s interesting? They have this in Europe already, and, uh, and it’s a registry as well, and, uh, it’s kind of where this migrated from, um, but now in Europe, they’re going to a whole new level, and now they are pushing, For transparency about public transparency, so anyone can pull up information on anyone else and get access to everything they own and get access to all businesses they’re involved in.

Cort: I think it’s very interesting and I think it’s very dangerous with, um. With people that are stealing identities. And then we have people stealing business identities, just having all that information available at the fingertips of anyone. I think this is better that it’s in a database that’s protected and it’s only there for, to serve a particular purpose if there is a law enforcement issue going on.

Cort: So tell us what, um, is involved in the process. What do our listeners, business owners, and entrepreneurs that have legal entities, LLCs, corporations, limited partnerships, what do they need to know? How does this process work?

David: Yeah, so Corporate Transparency Act, um, has a couple different ins and outs based on what type of business you have.

David: So if you’re a sole proprietor, obviously this does not, um, fall in your category. You don’t have to do anything. So what we’re talking about is corporations and LLCs, and there are 23 exemptions of those. Uh, it’s a whole list and we’ll put up some resources that you guys can go look at that, but what they’re really wanting is anybody that had an entity prior to January 1st of 2024, you have until the end of 2024 to submit a report, and what you’re going to be submitting is your information.

David: Now let’s talk about who has to report. So anybody that has controlling interest or 25 percent what they considered substantial interest. I didn’t know that. I didn’t know 25 percent was substantial, but apparently it is now. Um, that 25 percent means that you’re a part of this. So you’re in a partnership LLC, multi member LLC.

David: Now all the partners that have that 25 percent or more, uh, LLCs that are disregarded, LLCs that are corporations, whether S or C, they have to report as well. And so your information is your name, address, phone number, and a photo ID of your passport and, and, or driver’s license. And I think that’s what kind of got a lot of people a little, uh, jiggy with this is that they’re going, hey, that’s a lot of personal information that’s going out.

David: Understanding this is to combat, um, money laundering, terrorism. Um, white collar crimes, things of those natures. That’s, that’s what it’s there for. Uh, but on the outside it does appear to be a little invasive. But I, I do think it’s a good idea that this information is out there and that there is a, a collective database that has it, has access to it.

David: So, and it makes our job a lot easier. Um, the reporting companies that don’t have to are companies that have more than 20, 20 or more full time employees. Uh, as well as, uh, gross receipts or gross sales of five million dollars or more, so that eliminates a lot, uh, where they, when you talk about the list of, of types of industries that don’t have to do this, the reason is, is because they’re not better than us or whatever, they’ve already gone through this process, so we’re talking about financial institutions, brokerages, all of that information has already been submitted when they started, so any type of industry Uh, that deals with, uh, finance or any licensure is going to have to have this stuff reported anyways. Now it’s just trickling down to the small business.

Cort: Yeah, interesting, interesting. So, um, so tell us about the timing of this now just launched in January. How much time do existing business owners have to get their information into this database and new business owners?

David: Okay, so 1 moving forward. Uh, originally it was 30 days and I think, uh, they changed that back to 90 days now to give out a little bit more time, uh, because really in 30 days, I don’t know that most people would know where to gather the information from in the first place.

David: Um, if you set up an entity, as I said before, prior to January, um, 1st of 2024, you actually have till the end of December of 2024 to file that. And I’m going to tell people. Wait a little bit because things may change and and how those reports are done they rolled this out, you know pretty quickly once they got the the go ahead on it and They’re still changing some things.

David: So I mean you could go out and report today and say I’m done with it But there is a chance that you know, it may be an easier process possibly less invasive If you if you wait a little bit till the dust settles, so you’ve technically got 90 days From January 1st, if you set up January 2nd, because we were closed on the 1st, uh, you’ve got 90 days to fulfill that obligation to make sure that you get that information submitted.

David: If it was prior to January of 2024, then you have till the end of 2024.

Cort: So plenty of time. There’s no, there’s no rush to get things in. Even if you just filed a new business entity, you know, I’m sure my wife she’ll be like ready to get it done tomorrow. Um, uh, and I’m going to tell her just relax. We’ve got some time.

Cort: We’ve got a year to get this into the database. Um, but I think the important thing to know is that it has to be done and there’s, there’s, this isn’t an option thing. This is no, you will have it done by the end of this year. It’s good advice. I haven’t thought about that. Maybe just hitting pause a little bit, letting it evolve and seeing how the website might change.

Cort: Uh, the intake process, maybe they ask less information at some point in time. So, that’s good to kind of think of it in terms of that, but um, you know, there are some penalties. Is that right?

David: Absolutely. So, when we talk about penalties, uh, they really look more to civil and, and that is just either you didn’t do it on time, you didn’t get the right information across.

David: So, the way that we look at it from a civil standpoint is that if you fail to get it within the 90 days. Or something is not right and corrected, uh, it’s up to $500 a day penalty, uh, maximum at, uh, $10,000 and up to two years in prison.

Cort: For not filing the documentation. Yeah.


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David: So it’s not an option.

Cort: Well, it’s the federal government.

Cort: It’s like your taxes. I mean, there’s similar, you know, penalties and potential jail time if you don’t file taxes. We all know this, you know. So now this is another department that is collecting data on us and, uh, and they’re going to make sure that everybody gets it in there.

David: Yeah. And if they determine that it’s criminal, uh, that’s, that’s where the fines go up to $250,000 and up to five years in prison.

David: So, I mean, they’re, they’re taking it seriously. They want us to take it seriously. Everybody else to take it seriously. So. And we, we get that and we understand, um, right now there’s, there’s very clear cut information out there and we’ll provide links for that, uh, as where to go and find this information as far as how to, uh, fill out the report.

David: One of the suggestions to make it easier, uh, especially if you have multiple entities. is to get a FinSEN ID number. And that’ll allow you to file multiple entities at one time without having to submit individual applications, send in your driver’s license for each one. It’ll kind of take care of all of them.

David: Uh, right now the downside on that is, is, here’s the problem. If you shut down all of your entities, you still have an active FinSEN ID number. Which means, even though you have no more entities, and you move. Or your driver’s license expires and you have to get a new driver’s license. That is a change of information that they request.

David: So you may violate the FinCEN side of this without even having an LLC.

Cort: Interesting. Interesting. So, think twice before you get your FinCEN ID number. Everyone does not need that. You can register each business uniquely by itself. But there is this level of convenience that comes with getting a FinCEN number.

Cort: And then you can register multiple numbers under the, excuse me, multiple businesses under that number. So David, again, is bringing great advice out here because you never know what complications occur when you start getting an ID number and then on top of it, you’re registering each business entity, you can just strictly register each business entity and not do them in a group because you might be, uh, stuck updating your, you know, ID number for years, years and years from now.

Cort: And you might not have any more legal entities. And, uh, right now, as we talked about before the show, you Is there’s no clear way of removing yourself out of the system once you’re in the system and I’m sure that’ll get cleaned up as time goes on. They’ll have to figure that out as well.

David:  And that’s another reason for the pause, right?

David: Because these are things they’re still working on. So why subject yourself to that just to be early in the game? You know, sometimes I would rather be on the leading edge than the bleeding edge. And that’s kind of the way that we have to look at it. The other important aspect about this is what’s called the applicant.

David: The applicant is, is the company or whoever facilitated the process of doing the, um, paperwork for this entity. So within the beneficial, uh, ownership information report, you have to submit their information. Now, you know, for those clients that use NCH, it’s not NCH. Who is that? Who is that name? That’s going to go on that.

Cort: Well, it’s going to be, uh, yours truly, David, I’ll be the one on all business entities that we’ve. ever recorded that are still active so that our clients can know that they put that in the system and, uh, and all future business entities.

David: Okay. And here’s, here’s the great part about this. They’re not asking for the applicant on anything prior to January 1st of 2024, because some of these people have had these entities for 20, 30, 40 years.

Cort: Originally, they were going to ask that.

David: Right.

Cort: And I remember that. And that’s exactly what I was thinking is like. Well, who formed my business entity 20 years ago? And it’s like, I don’t know, an attorney down the street or a service provider like NCH, they might not even recall.

David: Yeah. So now it’s just anything January 1, 2024, moving forward that they’ll request that information as well.

Cort: So everybody’s required to do this. Um, you’ve got time to do it. So there’s no rush. Uh, it’s, it’s something that, you know, at first, for those of you that haven’t uploaded IDs, I think many people have uploaded IDs on platforms. Maybe banks have asked for that. Um, sometimes it’s, uh, even travel, uh, international travel.

Cort: You’re sometimes updating or sending in, you know, copy of your passport or your ID. So it’s not unusual, but there’s going to be a large percentage of the population. That this is going to be a little odd, like taking a picture of your ID or your passport and uploading it and making sure it’s clean and clear.

Cort: Um, it’s just a different thing. And, you know, uh, you may find it easier. This is a tip to do it on your phone because you can activate the camera, take a picture very easily on your phone. Um, fortunately I, when I did it, I have a laptop. And I do store my ID on my laptop, so it was real easy, but most people don’t have their IDs stored on their laptop and a photo of them.

Cort: So, you know, that’s just something to think about. The phone could be the easiest way to get this information in there because you’re going to have to take a picture. Now, know this, you can get in, you can log in, you can set up an account and then go back and complete it later after you’ve sort of dug around if you have any problems getting it done.

Cort: Yep. Absolutely. Fantastic. Well, you learned a little bit more about the Corporate Transparency Act today. It’s come to all of us in the United States of America, where every business owner has to register ownership information and contact information. And David’s really broken it down and made it easy for us here, which is fantastic.

Cort: David, thanks for doing that. Absolutely. It’s also called the BOI. You’ll find it online, that acronym. It’s the Beneficial ownership information report, the BOI. And so that acronym is going to be out there and now people are gonna learn about FinCEN, you know, the financial and crimes enforcement, all these new things that they haven’t had experience with before, but will become common vernacular.

Cort: Now, as we move forward. So thanks for educating us today, David. Absolutely. My pleasure is always fantastic. And thank you everyone for tuning in to another edition of wealthy and wise. You’ll learn something new today, something important, and please be sure to like, and subscribe our program here today.

Cort: Um, if you need information NCH and all the services that we offer entrepreneurs and investors. There is a link below, please click on it, gain information, access to all of our great team and our great staff. You can also schedule a consultation from one of our amazing advisors on how you can protect your assets using business entities properly for a new business or a piece of real estate that you maybe have in your name, which we never recommend.

Cort: Please take advantage of that. And thanks for tuning in to our program today.

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.

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