Lunch & Learn: The Corporate Transparency Act

Mary Hart [0:00] So if you mess up, even if you're innocent, and you mess up, you just forget, it's $500 a day, a day, a day, penalty for every entity.

Speaker 2 [0:09] We'd like to take a moment to thank one of this month's sponsors, Sabrina West. Sabrina West, a local mortgage expert with guaranteed rate, will provide you and your clients with real talk in real time. Sabrina is a mentor, investor, and money mortgage expert who provides customized individual consultations with a behavior finance approach and education to help build wealth through real estate. She believes in clients for life, so reach out today, Sabrina.west at rate.com, or give a follow on Instagram at Sabrina G rate. All right, guys. We are going to get started here. So we can get to what really matters, even though food's important. Listening to Mary might be more important today.

So, everybody here has an LLC, assuming, or is some sort of owner? Um, yeah, so the first time I heard Mary talk about this was, I don't know, three months ago, maybe, it feels like March, um, and I was like, What is happening? And since then, we've been texting and trying to set up a time to do, we were trying to do it, one of the main Navy all meetups, and I was like, Oh, maybe September, and she was like, That's too far out. We need to just do it sooner. And so, so we have our impromptu first lunch and learn. Um, we have three great sponsors who made a happen. Sabrina West with guaranteed rate. Kimmy with American Eagles right there. She's got some stuff over there, as well.

So make sure to check it out. And then, Alfie, if you do need money for a renovation or a fix and flip type of project, they're really good to work with. Sabrina will do more of your traditional mortgages. So, super simple housekeeping and agenda today, it's me here for maybe another minute and a half, and then it's all married. We have the room till two. Mary said she'll talk for about an hour ish, and Q and Day, so we'll go for, you know, however long we need to go, I guess. And then, you don't know, we're AVLmeetup. Our goal is to bring together the movers and Shakers in the actual real estate world.

So if you know a mover and shaker, please invite them to our next event, the premise is, we're all, you know, potentially one conversation away or one relationship away for something that's gonna totally change our business. And so the more good people we put together in a room, the better chance we have to have some exponential change in our own life. So how was the concept? Zach in the back, he's just gonna wave his hand. He's not even supposed to be here. He might run out 'cause he's having a baby at any point in time. But Zach and I do this thing together. So, what's a mover and shaker? This is our definition.

It's just an influential figure, driving changes, shaping industries, and making moves, with bold decisions and impactful actions. So, uh, today, we get to do part of that through what we call the net profit, uh, or the... I forgot, oh, there it is, that profit philosophy on the education component. So as we go through the transaction side of our business, we don't have any surprises that will have a very negative impact. So, with that being said, this is our next event, July 11th, at Capella 9, if you go to our website, you can get all of our information there. Totally free. Just come hang out on that one. It's just pure networking. That's it. And without further ado, marry.

Unknown [3:16] All right. Thank you.

Speaker 2 [3:18] Oh, here's the perfect.

Mary Hart [3:19] Oh, that's what makes it go. Okay. Hi, guys. I know I've met some of you before, not everybody, but, um, he mentioned surprises that can really bite you. This, what I'm talking about today, can really bite you, like, orange jumpsuit, kind of bite you. You go to jail. Felony. if you don't do it right. So, um, we're going to make sure you do it right. Who am I and why do I know this stuff? And it didn't show up. I guess I'll have to make up who I am, because my slide did not actually print. There's nothing on there. So, did you delete all my stuff? He said, you don't need to know who she is. Anyway, I have recently moved back to Asheville. I've been in the area off and on for the last 21 years.

I used to have a law firm here. I am a retired attorney. So I'm not practicing law, I am consulting. If people need my skill set, but otherwise, I don't practice law. I mentor and teach around the country to real estate investors and small business owners. Um, I have a women in real estate mastermind, and that's about it. I'm a private lender. I have a lot of my own real estate investments, retail spaces, vacation rentals, farmland, some commercial property going into my first storage development, big storage development up in New York. And my first big portfolio lending of 12 houses. So that's my big projects this week. All right, legal disclaimer? Yeah, this week.

Feels like it feels like this week. I am an attorney, but I'm not your attorney, so none of this is legal advice. This is education. We all have to say that when we stand up here. All right, so these slides look a little different than what I sent you, so they're the same, but totally different backgrounds. The original ones if you want. That's okay. As long as it has the same information, I'm gonna make it all up anyway. Not really. Not really. Not really. I'm not gonna make it up. So, who here has heard about the corporate transparency act and the beneficial ownership reports? So a few people. Has anybody in here actually filed their BOI yet? You have? Okay, that's awesome.

So this law I'm talking about today came out of the National Defense authorization Act that passed in 2021, but it did not go into effect until January of this year of 2024. So it is a brand new law, and as you will hear in a little bit. In my opinion, it is a very overreaching law. The purpose behind it, which we'll go into, is good, but it's very much an invasion of privacy for those of us who have to file these things.

So the purpose of it, what they're trying to do is get companies to report information about the owners and the people who have substantial control over the companies in an effort to prevent shell companies, anonymous shell companies that engage in nefarious acts, like human trafficking, money laundering, drug cartels. things like that.

Speaker 3 [6:01] So the reason behind it is actually very laudable.

Mary Hart [6:03] It's a very good reason. And I don't know how to fix it any better, but this law is very, the penalties are bad, and it requires a lot of your personal information, like where you live. As you'll see in a minute. Everybody should take a picture of this slide, because this is where you're going to find out a lot more detail than we can talk about in an hour. They have a good FAQ section. on this website. And I should go back and say, Fencen, you see there. This law is being managed by the Financial Crimes Enforcement network. That's Fencin, Financial Crimes Enforcement Network. It's part of our Department of Treasury.

And so this website is the government website for Fensend that has a lot of this information in it. As you'll see on the bottom of this slide, you can actually sign up for email updates. So if something changes in the law, you'll get an email and know about it. Okay, so what is this rule? We call it the beneficial ownership information rule. That's what I call it. And it requires certain entities, and I'm going to go over all of this in detail, but requires certain entities to file information about its beneficial owners, and that's a very broad definition, which you'll hear about in a minute, and company applicants.

Those are the people who actually file the documents with the Secretary of State to start your entity, like your LLC. So this rule is going to require certain companies to report certain information about certain people, and we'll go into detail about that.

Speaker 3 [7:32] Every single company or entity that was started by filing something with the Secretary of State, with the exception of a few, well, with a few exceptions, I think the 23 exceptions, actually, that are for big companies that are not going to apply, probably to anybody in this room, but every entity that was formed by filing, something with the state is going to have to file this report.

Mary Hart [7:55] This beneficial ownership information report. So what does that mean? Every corporation, whether you're a C corporation or an S corporation, every limited liability company, every statutory trust, like a Delaware statutory trust, or a Virginia business trust, so North Carolina, we don't file our trust by statute. But if you have trust in those states that file them, then these, those trusts are gonna be subject to this law. Also, and this is still a little bit of gray area, is that what about all our land trust, and our living trust, and things like that? If they own interest in LLCs or corporations, they're probably gonna have to have their information reported as well.

And I'll go into more detail about that. But as you can see, it's very broad. And, in fact, they're expecting, in this first year, 32 and 1/2 million businesses, to have to file reports. It is the obligation of the company to file the report, not the actual owner, but for most of us small businesses, the company is the owner. The person who's in control is the owner. So, important terms, I mentioned Fencin, Financial Crimes Enforcement Network. This next day, I'll talk about more detail, a few slides down, but it's the Fensen identifier.

This is something everybody should look into because when you hear the information that you have to report, and you have to report it for maybe multiple entities. Like, I have to report for 16 or 18 entities. that I'm part of, right? So if I had to go repeat all my information every time, that would be a pain in the rear end. But I can go ask for it. It's optional. I can ask for a fence and identifier, where I put my personal information in once, and I get a unique ID number, and now, for all of those entities, every 18 entities, I just put my number in. I don't have to report all my type it all in again.

Speaker 3 [9:39] So, I think offense and identifier is something everybody who needs to file should get. It is optional, though. You have to ask for it.

Mary Hart [9:47] So the reporting company I just mentioned, it's pretty much any corporation, LLC, or entity, any other entity that is created by filing with a secretary of state, or similar office. What does that mean?

Speaker 3 [9:59] It also applies to tribes that have, like, a secretary of state type thing, like Native American tribes.

Mary Hart [10:07] It applies to foreign country businesses that were started in a foreign country, but had to get authorized to do business here in the states. So it's pretty broad. And again, with a trust, it's kind of an, it depends. We don't know about the trusts. So what do they have to report? They have to report in 2020, for any entity that was started before January of this year. So any entity started in 2023 or before, we only have to report about the individual... I mean, excuse me, the beneficial owner. And I'm going to go through what that is. If you started an entity in 2024 or after, you also have to report the company applicant, which is whoever filed your documents, literally filed them.

If you had an attorney do it, a CPA do it, a paralegal do it, you have to report their information as well. Anybody other than you, you also have to report their information. So what is a beneficial owner? It's a very broad category. It is an individual who directly or indirectly, through any type of arrangement, has an ownership interest of 25% or more in a company, or exercises substantial control, which I'm going to tell you what that means in a minute. So if you have an entity that has 10 owners, and they all have 10%, and they don't have any substantial control, you don't have to report them. They're not beneficial owners.

So unless they have 25% ownership and or substantial control, they're not beneficial owners. Now, the substantial control means you serve as a senior officer. You can appoint and remove the board of directors. You make the day to day decisions. So even if you're not the owner, but you manage somebody else's business, and you're the one who makes all the decisions about that business, you may be considered a beneficial owner, even though you don't technically own anything, because you have substantial control.

Speaker 4 [12:01] And, um, Rodrigo, you're welcome to give everybody a copy of these slides so they don't have to take tons of this.

Mary Hart [12:07] We signed in, we'll send in the size.

Unknown [12:10] That's how we'll know.

Mary Hart [12:11] So if you didn't sign in, go sign in. All I would ask is, because these are my proprietary slides, don't share them around with other people. Just, um, keep them to yourself. So here's the senior officer, which is somebody who, by default, is considered to have substantial control. So if you've got a president, a chief financial officer, general counsel, CEO, CEO, you know, anybody, regardless of their title, that exercises substantial control. is going to be considered a beneficial owner, whether they technically own it or not. The ownership interest. What defines an ownership interest is very, very broad.

Speaker 3 [12:45] Remember, the government is trying to throw a wide net and catch all the bad guys, and gas. Everybody bad. So to do that, they've thrown a very, very wide net. So, obviously, anybody who owns, say, a share of a corporation or a membership interest, that's clear. But what if you just have voting rights, or capital interest, or profits interests?

Mary Hart [13:06] What about lenders who have profit sharing with companies? Are they beneficial owners? Maybe. Maybe. We don't have case law yet.

Speaker 3 [13:15] So you just have to think broadly when you're trying to decide. And when you hear about the penalties.

Mary Hart [13:21] I would say, if you're not sure whether someone's a beneficial owner, err on the side of caution and report their information. You'll hear why when I tell you about the penalties. Okay, so the company applicant, I mentioned earlier, that's literally the person who filed the document with the Secretary of State. So, I file my own documents, but I also used to file lots when I was an attorney for other people. So I would be listed as a company applicant. If that's the case, the company would have to report my information. And I'll tell you later what they have to report.

So, if someone goes to a law firm, and a paralegal actually does the filing, but they're supervised by an attorney, both the attorney and the paralegal are company applicants, and we have to file the information for both the attorney and the paralegal, or the CPA. I want to stop here for a second and talk about who files these reports, and we'll go into more detail about what has to be reported. Who files the reports? The company, as I said, the reporting company is the one responsible for filing the reports. So somebody in that company has to file them.

And probably, if they're not doing it right, the person who will be held responsible is the senior officer, whoever makes the decisions in that company, right? I don't know where I was going with that, except to say that the company reports it. And so the company has the responsibility of making sure that they get the information they need from everybody.

And you'll hear the detailed information in a minute, but one thing that just popped in my head, that I would suggest, is that everybody go make sure that when you find the information you have to get, which I'm going to tell you in a minute, that every member of your business that's an owner, or substantial control, that you get all that information from them, if you don't already have it, like copies of their driver's license, or passport, their personal residence, there. Did you have a question? Yeah.

Speaker 5 [15:10] So for the company applicant, you said if you filed in 2024 forward, you need that information, but if it was early...

Unknown [15:17] Right, you don't.

Speaker 3 [15:18] Right. That's true. Yes. So to clarify again, you only need to file for the company applicant for any entity filed in 2024 or thereafter. So if you have existing entities in 2023 or before, you still have to file for the beneficial owners, but not the company applicant. So you don't have to go back to your lawyer of 10 years ago and get their information. And that was one nice thing they did for us. We didn't have to do that. Okay, so what do we have to do?

Mary Hart [15:43] With an entity, we have to file this initial report, if we fall in the rubric of a reporting company, then there's an initial report, and if something changes, you've got to file an updated report within 30 days of the information changing.

Speaker 3 [15:58] If you find out you filed it inaccurately, that's called a corrected report, you also only have 30 days to correct a report. These timelines are tight. When do you have to actually file? I'm gonna go and tell you that now. I think it's on another slide, but, it depends on when the entity was formed. So for an entity that was in existence before January 1st of this year. So 2023 and before, you have all of 2024 to file.

Mary Hart [16:25] So you can wait till December 31st, if you wanted to. Do not recommend that.

Speaker 3 [16:29] But you could file it anytime during 2024. For any entity that you establish in 2024. You only have 90 days from the day you start it, till the day you have to file this report. If you start an entity in 2025 or after, you only have 30 days from the day you file the entity. So, really, your best business practices in 2024 and after should be, as soon as you file it, be ready to file that BOI report, because we'll forget. And if you don't file it right away, make sure you have a good calendaring system to remember it. We're still on the important terms, but the acceptable documents, we have to send in identification documents, and these are what they are.

Mary Hart [17:09] Non expired passport, non expired driver's license, non expired ID document issued by the state, or government, or Indian tribe, and a non explored passport from a foreign government, if it's a foreign business that is called up in this.

Speaker 5 [17:25] Hi, everybody, my name is Kimmy with American Eagle Home Inspection. We are your local one stop stop for all your home inspection needs in Western North Carolina. Do me a favor, pull out your phone, find us American Eagle Home Inspection on Instagram, give us a follow. You know what? There's only so much I can tell you about us in 30 seconds, but I promise you you will not be disappointed if you check out our content. It's very entertaining. It's going to tell you all you want to know about us. So check us out on Instagram, and we'd love to be your one-stop shop resource for your home inspection needs in Western North Carolina. Check us out.

Mary Hart [17:58] So this is the, yes, question.

Speaker 5 [18:01] Let me go back. Say your license as your identification information. and you renew it, or you get a new license, you have to update. 30 days.

Mary Hart [18:12] So I'm gonna let me tell you what you have to report, and then we'll talk about what some of those changes could be, where you have to file a updated report.

Speaker 3 [18:19] So, the reporting company, let me tell you these exceptions first. They're not going to apply to most of us, but it's like charities, large companies with 20 or more employees, and $5 million or more in revenue, banks, things like that. Why are they exempt?

Speaker 4 [18:34] Because they're already subject to so much regulation, the government feels like they already know their stuff. They already know about these companies.

Mary Hart [18:39] It's not going to apply to most or all of us in this room that have small businesses. Here's where you find the form, by the way. If you want the actual link to the actual form. You can take a picture of that. And the form itself. I haven't done mine yet.

Speaker 3 [18:53] And the reason I haven't done mine yet. Two reasons. One is because because it's so new, I expect there to be a lot of kinks in the system, so I was waiting to have all the kinks, you know, ironed out. And then I don't want to wait till the end of the year, because I think everybody's going to wait and crash the system. So I'm planning on doing mine in July. Mid year, I figure.

Mary Hart [19:13] Sometime between July and September, I'll do all mine. Okay, Vincent has reported this, that there are people committing fraud, believe it or not. I mean, we all know this happens. So, uh, anytime you get something that looks like it's from Fencin, ignore it. They're not gonna send you anything. You have to learn about this law and go do this stuff yourself.

Speaker 3 [19:32] They're not gonna send you a form, or a QR code, or anything else to click on. Okay, I don't know what happened to my...

Mary Hart [19:40] What information must be reported? I feel like I'm missing a slide, but we'll see. Maybe it's down here.

Speaker 3 [19:46] I talked about the timelines. Okay, this is what I want to get at. The penalties for noncompliance. Guys, read this, and anybody want to run to the restroom and throw up because it's pretty bad. So if you mess up, even if you're innocent and you mess up. You just forget. It's $500 a day, a day, a day. penalty for every entity. So if I had 16 entities, I have to report. That's $8,000 a day, penalty against me per day, per day. It's ridiculous. That's $32,000. Every four days. I mean, it's crazy.

Anyway, criminal penalties, if you're found to have been willful about it, and it's a crime, it is a crime to not file it, you can be subject to a $10,000 criminal fine and imprisonment up to two years. So if you don't think you look good in that orange jumpsuit, You guys need to take this law very seriously. Now, my tinfoil hat side says this is a government revenue grab to a degree, because they're gonna catch a lot of people and make a lot of revenue off this. Now, I think they're, again, the goal is laudable what they're trying to do, but I have taught this to many, many high up executive CEOs, small business owners, everything, hardly anybody's ever heard of it.

How many in here, I asked before, but I forgot how many had heard of it before today.

Unknown [21:05] A handful.

Speaker 3 [21:07] More than half the room has not. This is ridiculous. This has been a law since 2021. And, in effect, since January, and most people don't know about it.

Mary Hart [21:16] It's really bad. So the penalties are bad. So what has to be reported? This is the meat of what you guys have to, the information you have to gather.

Speaker 3 [21:25] So again, we've already talked about in 2024, you have to report your company applicant. What I didn't say, though, is you can't report the name of a law firm. It's got to be an actual individual. Literally the person who either pushed the button or put the envelope in the mail. to file your documents with the Secretary of State, an individual.

Mary Hart [21:45] And it includes the direct filers, the people who directly filed it. My example, it was the paralegal or the secretary. It also includes the individual who directs or controls that person, if they have a supervisor. So, in my example, it was the lawyer and the paralegal would both have to be reported.

Speaker 3 [22:03] So for the company, we have to report information for the company, and for every beneficial owner, and in 2024 and after, every company applicant.

Mary Hart [22:14] So what has to be reported for the company?

Speaker 3 [22:16] The full legal name of the company, the DBA are doing business as any trade name.

Mary Hart [22:24] So, like, if I had Salas Properties, LLC, which is what an LLC I have, if I did a DBA, Salas lending, Salas Lending, I got a report, Salas Properties, LLC, and Salas Lending as a DBA. So every name your business goes by, whether it's the formal name or not, has to be reported. You have to report the current U.S. address for the principal place of business. Remember back when we file our LLC documents, we say no principal place of business half the time? Well, you better have one. If it's your home, that's your home. It's your home address. P.O. Box will not... No, because it has to be the principal place of business, like a walk in place, you know.

So, you have to report your IRS number, your EIN, or your tax identification number. I'm not going to go into the foreign company stuff, because anybody in here start their company in a foreign country. No, okay. All right. So the information required for individuals. Full legal name, Mary Elizabeth Hart. I cannot say Mary E Heart. I cannot say Mary Hart. I have to say my full legal name. My date of birth. My residential street address, where I live. Who's worried about stalkers, getting this information? I worry about stalkers, finding out where their ex lives or something.

If it's a company applicant, like the lawyer paralegal, in my example, you can use their business address, but for all the beneficial owners, it has to be their personal residence. Unique identifying number and jurisdiction, like your driver's license number, and a picture of one of the following, your driver's license, your passport, or a state ID. We've talked about the amount of the penalties, but what can you be liable for? Liable for failure to report at all? That's going to catch a lot of people. But you can also be liable, if you do not give information, your information to a company that needs it. Let's say you're an owner, but somebody else manages the company.

They need your information to file this report. If you don't give it to them, you're also potentially liable for all these penalties. If you give fake or fraudulent information, You're also liable. And the senior officers of the company could potentially be liable for failure to file.

So one of the things that, if I were practicing law, which I'm not, but I'm gonna do for myself, whenever I start a new LLC, and I have a new operating agreement, and I suggest you guys all amend your operating agreements, or your bylaws, whatever it is for your corporation, I'm gonna make it a requirement that every member or every shareholder has to supply all this information, and if they don't, they lose their right to vote, or whatever it is, whatever penalty I can come up with, until they give me their information, like if I had multiple members in my company. So I would suggest you guys, was that a question? No, okay.

Speaker 3 [25:21] Okay, we talked about the fence and identifier, you can see now, because of what you have to report.

Speaker 4 [25:26] Like, for me, if it's 16 companies, and every time I've got to type in my name, my address, my ID number, blah, blah, blah, I'm just gonna go get a fence and identifier number.

Speaker 3 [25:35] Also, let's say you have layers of companies. Um, you can, the company itself can get fins and identifiers.

Speaker 4 [25:43] So if a company is a member of another company and another company, another company, they can just use one of those identifiers as well. All right, so again, you have to ask for them. This is not something they're going to do for you. You have to go to that fenced in website and ask for it. And if, like you said, if anything changes, you got to go update your fence and ID number. But it's better than updating maybe every single company record, right? So what things can change? Somebody gets married and changes their name. Somebody changes their driver's license, somebody changes their address, where they live, right?

Speaker 3 [26:18] This law does not apply initially to minor children, and that age of majority by the way, is based on the state where the company is located, not necessarily even where the child is. So let's say it's 18. A child doesn't have to file till they're 18. But what happens when they're 18? Somebody's gotta go file a report for that beneficial owner. Who's gonna remember to do that? In a company. Think about the family companies, or even the, you know, some certain trust or whatever, where it goes down, somebody dies, it goes down to kids or grandkids. Who's gonna remember to go, Oh, wait, there was a company that went to that grandkid.

Mary Hart [26:53] We got to go change our beneficial ownership report. But technically, if you don't do it, it's a fine. It's very overreaching.

Speaker 3 [27:02] All right, this is why I was just going to, who does not have to be disclosed, that minor child until the age of majority.

Speaker 4 [27:09] If someone just owns shares as a custodian or an agent, think, like, quest trust company or, you know, any stock company that's just holding your shares as a nominee, they don't have to be reported. You're really the owner.

Speaker 3 [27:21] Any employee whose authority is just due to employment, not because they're a senior officer, you know, they're not an officer or director, they're just an employee, like a secretary or somebody.

Mary Hart [27:34] Creditors do not have to be disclosed. And any individual who is going to inherit a company but hasn't yet inherited it, so does not have to be disclosed until they inherit it. Then you have to disclose them. So we talked about this a little bit. Who reports? The company is required to report, so that's basically going to be the senior officer, whoever's in charge of the company. The actual owners of the company don't have to report. They just have to give their information to the company.

Speaker 4 [28:03] So, when you file your filing on behalf of your company, not on behalf of you individually, even though it's your individual information. Does that make sense? You guys know what I'm saying? It's not your responsibility as the individual owner.

Mary Hart [28:17] It's the company's responsibility, which in many small businesses is one and the same. So this is gonna affect virtually all small family businesses. And as I kind of alluded to earlier, its ownership is not as simple as it sounds, because what about if there's joint ownership, or trust, or profits, interest, or things like that?

Speaker 3 [28:36] It's still a complicated question because it's so new, it hasn't even run its first full year. We don't have the answers. We have only what Fensen puts in its FAQs. Really, there's no case law. There's none of that yet.

Speaker 4 [28:51] So, and I mentioned that any trust that's created with the state filing is going to need to report.

Mary Hart [28:57] Let's talk about the trust that's a beneficial owner. So for me, I have, say, a living trust for my estate planning purposes. My living trust owns a holding company, which then owns a bunch of little companies, right? So my trust owns 100% of the holding company. So it, that trust, me as a trustee, is the beneficial owner of that holding company. Those baby companies, depending on how many and what percentage they own of the holding company, they're all beneficial owners. I mean, they're all the holding company, is a beneficial owner of the baby companies. You see what I mean?

So you have to try to just track down all these trees, if you have anything other than one owner, one business, you're gonna have to figure it out. So, for me, I started, and I haven't finished it yet, but I started a spreadsheet, where I'm listing every single entity I can think of, that I have any relationship to whatsoever. And then I'm listing every single other member. What the ownership interest? You know, how much percentage, blah, blah, blah. And then I've got to figure out, okay, out of those companies, which one meets which ones meet the test of 25% or more ownership? substantial control. So I've got all these trusts. I've got personal property trusts for lending.

I've got personal property trust to own my vehicles. Are there any companies in there? I don't know. I gotta go look. See. What owns what? So, the trustee of a trust, if the trust is a beneficial owner, it's probably the trustees' information that's gonna need to be reported. What about trust protectors? You guys know what trust protectors are? Most people haven't heard of them. So a trust protector, we often put in trust documents.

Speaker 3 [30:38] They're not a trustee with a fiduciary duty. They're like a watchdog.

Speaker 4 [30:41] So you can give a trust protector certain powers, like, to remove and replace a trustee that's not doing their job, or to say, That beneficiary doesn't get a distribution because they're on drugs, or whatever. So you give them, like, certain powers, but they're not considered a trustee.

Mary Hart [30:56] Are we gonna have to report them? Probably not, even if the trust is an owner. Probably not. But no case law yet. Investment trustees. Probably not, but nobody really knows yet. Okay, so what I have learned, I didn't make this up. I got it from some continuing education, is that if the trust owns more 25% or more of an entity. Then the beneficiaries of the trust may be considered or probably are considered beneficial owners, where you don't have to list just the trustee. You may have to list the beneficiaries if they're different.

If they have the sole recipient of the income from the trust, If they have distribution rights for the assets in the trust, If they're the grantor, meaning the person who set it up, and they have the right to revoke the trust, Sounds a lot like a living trust and a land trust to me.

Speaker 3 [31:45] So, for me, when I'm going through all this, and it's gray, I'm going to report anytime I think it's possible, because I don't want the orange jumpsuit, and I don't want $500 day penalty. I think it's less likely we'll go to jail for an innocent mistake, but it's the law they could throw in federal prison.

Unknown [32:04] All right.

Speaker 3 [32:06] And actually, I'm faster than I thought, 'cause this is my last slide on this. This is very, very serious. I try to go out and teach it because most people, like I said, haven't heard of it. And, um, we haven't seen yet what the enforcement is going to look like because the first deadline hasn't come yet.

Speaker 4 [32:24] At least not for existing entities. Somebody who filed in the first half of 2024 had 90 days to file, so there might be some that are late, like they filed in January, and they haven't filed their report, if they set up their entity in January.

Speaker 3 [32:37] But we haven't seen anything in the news about that. Obviously, people are very up in arms about this, small business owners. There was one court case in the federal district in Alabama, Northern District of Alabama, where a series of plaintiffs, along with the National Small Business Association, sued Finson, and saying this was unconstitutional, and they won.

Mary Hart [32:59] They won. Now, two things with that. That case only applies to those particular plaintiffs, and to the members of the National Small Business Association, as of March, whatever it was that the date that the case was decided, March something of this year.

Speaker 4 [33:15] So it doesn't apply, probably, to any of us in this room, unless you remember that organization in March.

Speaker 3 [33:22] It also, that case, and I read it a long time ago, but what they held it unconstitutional on, was a very narrow thing, and they basically told the Fensen how they fixed the problem. So the question is, is that gonna happen in other cases where it's gonna ultimately be held unconstitutional as it is? Nobody knows. I haven't checked to see what that case got appealed by fencing, but I would expect them to appeal it. I don't know. So, for me, like I said earlier, I'm gonna take this very seriously, and I'm going to file, even if I personally might think it's unconstitutional or whatever, I'm gonna file, because I don't want to go to jail, and I don't want to pay $8,000 a day and penalties.

So that's the last slide. I went f than I thought. So let's take questions. Happy Friday. And, you know, Reg, Jerry, I may have to say is, I get pulled up here to talk about the unsexy stuff in real estate. It's just not fair. I never get the sexy topics, so, you know, talk about dying and corporate transparency.

Speaker 2 [34:22] Do you mind repeating the question just for... Sure.

Speaker 4 [34:25] I'll repeat the question, yes.

Speaker 2 [34:27] So after this year's bedline recording, is there an annual, some sort of upkeep reporting that you have to do, or is it just report this year, unless you change anything?

Speaker 3 [34:36] Good question. The question is, do you file your initial report? Is there any annual reporting you have to do? No, thankfully. The only time you have to update, again, is if you find an inaccuracy in the report, and you have to file a corrected report, or if some information changes and you have to file an updated report? report report Good question.

Speaker 4 [34:54] Is everybody just in shell shock, yes? Probably more of a comment than a question.

Unknown [34:58] Okay.

Speaker 4 [34:59] I did not make the law.

Speaker 5 [35:01] It's a complete overreach. Yeah. It was fascinating. Is the majority of that information that you had up there? is already on all tax returns, set of files.

Speaker 3 [35:12] No, that's not true. I don't file it with a copy of my driver's license.

Speaker 4 [35:16] They don't necessarily have all the owners of a company. A company files a tax return, but they don't necessarily know who all who's in substantial control or who every owner is. They're just looking at the company for tax purposes. So not all that information, 'cause I thought that, too.

Speaker 5 [35:31] Well, percentages of LLCs are... On a No.

Unknown [35:35] Yeah.

Speaker 4 [35:36] But you don't have for that owner, you have their name, but you're not gonna have... don't remember on a K1. You're not gonna have a copy of their driver's license. You're not gonna have necessarily their personal residence, are you? I don't know. So, well, I agree, completely. And way overreach is what he said, but, um, and I forgot to repeat the question, I'm sorry, or the comment, but, um, just overreach and that the IRS has a lot of that information.

Speaker 3 [35:57] I think that this law, they're trying to get whatever information they don't think the IRS has, they're trying to get it here, and they're going to amalgamate all that information and know a lot about everybody.

Mary Hart [36:08] Now, theoretically, and I meant to say this earlier, theoretically, this information, under the law, is only accessible by fence in, by certain law enforcement agencies, and certain financial institutions, in certain situations. So it's not like it's public records.

Speaker 3 [36:24] But we know things get hacked, and we know information gets leaked. So that gives me absolutely no comfort level.

Speaker 4 [36:31] And so, one of the things I'm going to do, and I haven't done it yet, but I would suggest everybody do is look into getting identity theft insurance. Because you're now putting out copy of your driver's license.

Speaker 3 [36:43] Your home address, your social security number, maybe your passport. That's right, other than your mother's main name, what else do they need? Right? So I would look into identity theft insurance, yes.

Speaker 5 [36:56] Two questions, one for more clarity. Okay. For the update, then, and actually, to this lady's question over here. So our driver's license or passport expires, we get a new one, we have to do enough date.

Speaker 3 [37:10] Well, let me let me say that nowhere in the the question is, if your driver's license or passport expires and gets renewed, after you filed your initial report, do you have to file an updated report? It doesn't say specifically, it just says if any of the information changes. So now you have a new expiration date on your driver's license, maybe have a new picture.

Mary Hart [37:31] They'll know that that matters, but text something changed.

Speaker 3 [37:35] They don't list that as an exception. Oh, if you're just renewing a driver's license or a passport, don't worry about it. So what would I do to be safe? I'd file an updated report.

Speaker 5 [37:42] And then my second question is, did I understand that's not clear about filing for a living trust?

Speaker 3 [37:49] Right. Is it clear or not clear about filing for living trust? It's not completely clear, because in the FAQs that Fenson puts out, they don't really address a trust.

Speaker 4 [38:00] So, the professionals in the space, the state planning lawyers like me, and other people, are trying to guess as best as possible based on the letter of the law.

Mary Hart [38:09] And it's clear that the law says, a beneficial owner is any individual directly or indirectly owning 25% or more of a company. So, if the trustee of the trust owns, say, 25% or more of an LLC, Sounds like a beneficial owner to me. And then what about the beneficiaries that are in there?

Speaker 3 [38:29] Well, again, I read you that one thing that I've heard that from one expert, so I have not been able to find anything that really expands on that or expounds on that, and that's because it's so new. Nobody knows really how they're going to enforce this. Again, for me, I'm going to assume it's going to relate. So on my living trust, I'm the grantor, the trustee, and the beneficiary, until I die, than somebody else inherits after me. But I'm all three, so my information's out there anyway. Now, let's say that I was the trustee of someone else's trust.

Mary Hart [39:00] I wasn't the grand tour or the beneficiary. Would I file for the beneficiaries? I don't know.

Speaker 3 [39:05] If they met all those tests that some other expert said, treat them like owners, then I might do it out of an abundance of caution.

Speaker 4 [39:13] Unless they're not yet 18. But then I've got a tickle in my calendar. We got to go back and update that report when that beneficiary is 18 or whatever the age and majority is in the state where the company is. Yeah, you're welcome.

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Speaker 5 [40:35] I looked up on their website. They did a press release that they're appealing it on March. Oh, good.

Speaker 4 [40:41] Good. Because I had not looked that up to see, so they did appeal it. God only knows how long that will take. That's the Fensen case in Northern Alabama. They have appealed it. I knew they would, but we don't have any result of that yet.

Speaker 5 [40:52] So my question is about, you've talked about your trust, and then your trust maybe owns small companies, LLCs, under that. I haven't gone on to do the form yet, so I don't know what the format is, of how they ask the questions, but if you're listing beneficial owners, you were saying at one point that that has to be a person, but is there a place to put a beneficial owner that is a trust or... No, you list.

Speaker 4 [41:15] No, no, no, you list the trustee. as the end of the person, the trustee. So if I'm the trustee of my trust, that's my information.

Mary Hart [41:21] And it doesn't even show. In other words...

Speaker 4 [41:24] I've looked at the form, because it goes in, you know, you fill it out, kind of, as you go, and so I haven't done mine yet. So I've been told that it's a very easy process, but nobody that I've talked to about that has had trust to deal with yet, so I don't know. I'll come back and give you guys an update after July, when I hopefully do mine in July, yes.

Speaker 5 [41:42] What about all the small businesses that go through different cap table? Like, Lawrence options, where they get acquired, or they go do another round of Series A, or Series B, and the cat table, and it's every couple years.

Speaker 3 [41:56] You mean, in terms of who the owners are?

Speaker 4 [41:58] Well, you have to look at if anybody owns 25% or more. or has substantial control, you're gonna have to update a report. A lot of those, like syndications and whatnot, they're each other than the GPs, general partners. The limited partners, most of them own less than 25%. You've got a bigger pool. But the general partners often own more. So, hopefully, the general partners aren't changing a lot in syndications and things like that, but, you know, you know what I mean? But, yeah, you're just gonna have to look.

That is what makes us such pain, because if it changes, and I didn't repeat the question again, Rodrigo, I'm sorry, but basically, she was asking if in a syndication, or something like that, where you have, you know, different owners cycling in and out, whether you have to change it, every time they do another fundraiser, a series A, or whatever, you're just gonna have to look and see if anybody's a 25% or more owner, or has substantial control. Make that change. Yes.

Speaker 5 [42:52] So, for, like, small business owners that park list when they get into this thing. And then they go through, like, a third party, like, then business, then folio, all those kind of companies, what is the suggestion?

Speaker 3 [43:04] So people who start their business through 3rd parties like Zen, folio, or something? don't know these companies, but, um, what is the procedure? Technically, if they filed it, their company applicants, and somebody, some individual in that company has to be listed in 2024 and after, on the beneficial report, as a company applicant.

Speaker 4 [43:25] How you're gonna find that information, I have no idea. My guess is those companies will have to start providing that information as part of their filing.

Unknown [43:34] Give me.

Speaker 5 [43:35] So in her example, say Jane Doe works for Zen, whatever, and she had to file a report. She's got to put her name on it. Is she currently liable if there's errors in the report?

Speaker 3 [43:45] No, because she's not, is the person, the company, I'm sorry, I'm repeating for the camera. I keep forgetting, is, um, so third party company, like, Zenfolio? I never heard of, whatever it is. File's the thing, and let's say Kimmy is the person who actually pushed the button and filed it. Is she criminally responsible if it doesn't get filed? The report. No, because it's the company's obligation to file, not yours. Now, could you be liable if you refuse to give your information so the company could file it? Yes. See what I mean? So, you, and that's, remember, I read the different ways you could be found liable? One is a company that fails to report, so the senior officer of that company.

Speaker 4 [44:25] One is if you fail to give information when needed, and one is if you give fraudulent or fake information.

Speaker 5 [44:32] Do I have some sort of, like, full harmless agreement that... Nope. Like, I can only imagine, like, those people, I mean, for working for these companies aren't paid much. So to put their name on a corporate filing for 100s and 1000s of companies...

Speaker 3 [44:46] So let's talk about that. Talk about people who might, who just do this, and they're not, they're not paid much. They're like admin assistants. They're just pushing a button. Are they really gonna want their personal information out there? I wouldn't, if it were me, so I think we're gonna have issues. Now, one thing I think we're gonna see, and I've seen a little bit of it already, is that the people who often file these things for small businesses, like your lawyer, your CPA.

Speaker 4 [45:08] I think there are going to be a lot of companies that refuse to do it, period. And I think the companies who do it are gonna charge you a lot of money.

Speaker 3 [45:16] Why? Because it's not like just filing, you know, your articles of organization where it's just 10 minutes, and you're done. This is gonna take a lot of research to figure out, who are all the layers of owners? Are there any of those 18 year old grandkids who inherited? You know, it's a lot more information and a lot more liability. The only good part about the third party company and the employee of the third party companies. They don't have to give their personal home address. They can use the business address, but they still have to do their name and driver's license, all that.

Speaker 5 [45:46] But if you don't have a number, yes. If you live in an RV, you just travel around the world.

Speaker 3 [45:52] That's a very good question. and I don't think Vincent has addressed that yet. So what if you live in an RV? You don't have a home.

Speaker 4 [45:57] I think everybody has a male home, usually. No. No, but some city. I don't know if you're doing a P.O. box, but if some I don't know the answer to that, because you have to put down your residential address. You could say, itinerant RVer, where in the world is Kimmy? I don't know, you know? I don't know how you deal with that.

Speaker 3 [46:18] Yeah, I mean, those are the questions that we will see as this gets further along. Those are the type of real world problems that are going to come up, and I'm sure we'll, at some point, have pronouncements on that. But right now, this is all just brand new. We're all like, I don't know what to do. You know? It's kind of crazy. Yes.

Speaker 5 [46:37] Can you touch on the timeline? you need to file, and you talk about the 30 days from when you file.

Speaker 4 [46:43] Yeah, so not yet for the 30 days. But so any entity that was already in existence before January one of this year.

Speaker 3 [46:50] So an entity you formed in 2023 or earlier has until the end of this year to file. So any preexisting entity has till the end of 2024. Any entity you filed in 2024 that you created in 2024 has 90 days from the day you create it. So three months. So anybody who filed in January, February, March, is already late, if they didn't file it.

Speaker 4 [47:14] For entities you create in 2025 and after, we only have 30 days, past creation, to file it. Anytime you have to file an updated or corrected report on any of those entities, regardless of the year formation, you have 30 days. From the date you found out the information need to be updated or corrected. Short timelines.

Speaker 5 [47:37] I just want to make comments as I've done my filing. Oh, good. Tell us how it was, yeah. It really wasn't easy peasy, so to speak, given, you know, what you're sharing. Yeah. My recommendation and what they also offer is to print a copy of the, like, print to a PDF and save it. So at least, you know, remember when you said, like, timelining that. make a change. at least you have a copy of it, you know what you file.

Speaker 4 [48:02] Yeah. I think that's a great idea. She said she's done her filing. The filing itself is easy. Let me just add on to that comment. I think the more difficult part is first figuring out, if you have multiple entities and layers of ownership, what has to be filed. And two, then you just got to take the time to gather all the information, the photocopies of the IDs, the EINs, the addresses, whatever. But the form itself, I have been told, is fairly easy to fill out. Especially if you have your identifier number. It's even easier.

Speaker 5 [48:29] So, what I can print out on PBM, it does have basically the information that you input it, and then confirmation number.

Speaker 3 [48:36] Good. So, yeah, so print, when you file it, print out a PDF, keep it in your files, 'cause it proves when you filed it and what information you gave them. Good comment, yes.

Speaker 5 [48:46] Uh, question about that 90 day timeline for this year. Yeah. So, um, I had an LLC, I made three, four years ago, um, had plan Ds or something, ended up not, just sat there, paid the dues on it, didn't use it for anything. Started a small business about 91 days ago, and then put it to the, you know, put then switched the LLC to that and switched like the type of LLC, all that type of stuff. So that 90 days, is that like your business or the...

Speaker 4 [49:15] It's the entity, creation. So if your business was started and you used your old LLC, you've got till the end of this year. If you created a new LLC, We're gonna do it this weekend, either way. Yeah. But if you created a new LLC, then you're one day late. Gotcha.

Unknown [49:30] Okay.

Speaker 4 [49:31] And so it just depends. what you use. And it's an interesting question, because actually, I'm probably getting ready to start a new business, and I have an LLC that I've sold all the assets out of, and I'm like, you know what? I think I'm just gonna use that LLC for this new business, 'cause it's still sitting there. It's an old one, want to have my credit history, I have everything else with it. And two, now I get to the end of the year, I don't have a 90 day requirement for starting a new LLC.

Unknown [49:58] Yes.

Speaker 5 [49:59] The Vincent ID number that you talked about? Can you talk about that a little bit more, is a fence N ID number tied to a human being, and then it sounds like maybe you want to set that up, get the ID number before you do a filing for an entity?

Speaker 3 [50:13] Both individuals, the question is, does offense and identifier number go with an individual or an entity, and when should you get them?

Speaker 4 [50:20] It goes to both. So both a company can get one, and an individual can get one. And I would certainly get them before you do any filing.

Speaker 3 [50:29] If you're going to use them at all, get it before the filing, because then it makes your filing easy, instead of putting all that information, you're saying, Here's my number, 1, 2, 3, 4, 5, 6, You're done, because you already gave them all that information. They gave you a number, and now every time, if you have to update a form or anything else, You've updated your fence and identifier. just put that number back in the form.

Speaker 4 [50:48] So I think it's going to make things easier for people that have more than one entity.

Speaker 5 [50:53] So when do you get one for you, a human versus for a company?

Speaker 3 [50:58] Well, remember that the company has to report. So if you just have one company, just typing out the information in once. Who cares?

Speaker 4 [51:06] I wouldn't necessarily worry about it. She asks when you have to get it for an individual versus a company, the fence and identifier. But, like, for me, when I have companies that own companies, and I might have to report that same company multiple times, I'm gonna go ahead and get the fence and identifier number, because I've got to report that company's information more than once. So anytime for me, in my mind, that you have to report it more than once, because of the web of ownership. I'm just gonna go ahead and get the fence and identifiers. It's free. It's easy to get. And that way, I'm just like, I type in my number, and I don't have to type in all that other information.

I've typed it in once when I applied for the FenSen ID. Does that make sense?

Unknown [51:45] Yeah.

Speaker 4 [51:47] And then, also, by the way, if something changes, let's say my address changes, my understanding, and again, this is new, so we haven't seen it play out yet, is that you have to just go change your information on your fins and identifier, and not to all 16 entities, because it tracks, now you've got it on the identifier has been changed. So, does that make sense? So, to me, that's one of the biggest reasons to get it. Because then I'm just changing the identifier information, and it changes all the entities that I filed, and all of my ownership thing. So if I'm an owner in, you know, 16 entities or a substantial manager or whatever, one fence and identifier number will change everything.

Another reason why people might stop changing their name when they get married. Who wants to go redo all their fencing stuff if they get married and change their name.

Speaker 3 [52:38] Other questions. Who hates this law?

Speaker 5 [52:42] Okay, in a unanimous room.

Unknown [52:44] What government entity is gonna be tracking them?

Speaker 4 [52:47] Finson, the Financial Crimes Enforcement Network, which is part of the U.S. Department of Treasury, is in charge.

Unknown [52:54] How long have they been doing business?

Speaker 4 [52:56] Vinson's been around for a long time.

Unknown [52:58] Yeah. Yes.

Speaker 5 [53:01] Are there any rumors that this might go away over the elections?

Speaker 3 [53:04] I have not, I have not heard that. I have not heard that. I will say, and this is just anecdotally. The question was, will any rumors this will go away after the elections?

Speaker 4 [53:13] I did hear, and I haven't researched this myself, that it first came up when Trump was in office last, and he vetoed it, and then it got put into play in 2021 with current prison.

Speaker 5 [53:25] How many companies he runs, but I guess his are large enough...

Speaker 4 [53:29] Yeah, I mean, they might be excluded. Yeah, yeah. So, who knows, but it is, it is a law, so it's gonna take a lot to change.

Speaker 3 [53:39] It's not like a proposed law. It is a law. With big penalties. Yes. Yes, another comment.

Speaker 5 [53:46] Yeah, no good.

Speaker 3 [53:48] Comments are good.

Speaker 5 [53:49] You know, because, also, because if you can domino. Mm hmm. What you were saying? Mm hmm. I would inquire with, like, your financial accountant or an attorney, about doing it for you. A lot of who I've heard in the beginning of the year is that they won't do it. Yeah, ultimately responsible, but that's your older response. Like, here's the information, here's what you need to know. I'm not gonna do it more.

Speaker 4 [54:11] So I, she's saying that, you know, check with your attorney, your CPA to see if they'll file these things for you, particularly if you have multiple layers. Um, I've already gotten the obligatory letter from my financial advisor, my CPA, my other CPA, and we're not doing it. You're responsible for doing it. Here's the BOI law, same stuff I showed you.

Unknown [54:30] Go figure it out.

Speaker 3 [54:30] They're not gonna do it. It's a lot of liability on them. They don't have time. They are already so busy. And some companies will do it, but I don't think it'll be cheap. So what I would do is just make sure if you start new entities or, you know, make a note to yourself that just do it when you start a new entity, the form itself is easy, just do it yourself, when every time you start an entity. Are there any, no, you filing fee, or is it?

Speaker 4 [54:55] Are there any known filing fees is free? It's free. At least they did that for you. At least they did that. Yeah, no, no, no. It's free. No, that could change, but right now, it's free.

Unknown [55:06] Any other questions?

Speaker 3 [55:09] Yep, we're all good. Okay, well, thank you guys for listening.

Speaker 2 [55:17] Hey, guys, Rodrigo here, wanted to say thank you for taking the time to listen into this month's panel conversation. We hope that you join us in person at next month's meeting. You can find out more at AVLmeetup.com. We primarily meet on the 1st Tuesday of every month, but be sure to check out our website, AVLmeetup.com. You can also watch this conversation on YouTube at AVLmeetup. Also, I have a quick announcement. We started a property management company called Vesta Property Management. So if you're looking for third-party management for long-term rental. We'd love the opportunity to talk to. Our goal at Vesta is to turn houses into homes and investments in 2 returns.

If you're looking to work with a third-party management company, that will allow you to have peace of mind and experience freedom around rentals. Uh, reach out to us. can help make that happen for you. Bestapm.com. What's going on, everyone. Zach here to close it out before you sign off for the day. If you liked the data driven portion of today's meetup, then I'd love to take a moment to tell you about the Ruiz Report and REMC.co. If you're a real estate professional, then you know that you should become the local economist of choice, but you're probably unsure of how to learn the skills required. That's where the Ruiz Report comes in.

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Again, you can find out more about REMC.co at REMC.co. As always, thanks for listening and we hope to see you at one of our next meetups. If you can't make it and you still want to be part of the movers and shakers, then sign up for a free account at AVLmeetup.com and get yourself into our member directory. Thanks again. See you next month.