In this episode of The Same Day Podcast, Mat Zalk hosts Trevor Riddle, the Owner and Attorney at Riddle Law, who breaks down the Corporate Transparency Act. Trevor explains the exceptions to the law, how to navigate the act, and how to determine business ownerships and partnerships.
The Corporate Transparency Act: What Businesses Should Know
Trevor Riddle is the Owner and Attorney at Riddle Law, PLLC, where he helps clients at every stage of life plan for the future through comprehensive family planning services, including estate planning, adoption, and surrogacy. As a seasoned attorney, he has 20 years of experience representing clients in real estate and business planning, protecting their individual freedom with empathy, understanding, and trust.
Here’s a glimpse of what you’ll learn:
- Trevor Riddle describes his personal background and career in law
- What is the Corporate Transparency Act?
- The requirements of businesses filing under the Corporate Transparency Act
- Determining business ownerships and partnerships
- Trevor addresses the caveats of the Corporate Transparency Act
- How the federal government enforces the Corporate Transparency Act
- Exceptions to entities reporting under the Corporate Transparency Act
- Advice for navigating the Corporate Transparency Act
In this episode…
In 2021, congress passed the Corporate Transparency Act requiring businesses — namely LLCs — to disclose ownership parties. This purportedly reduces money laundering and the financing of terrorism. Yet tracing a company back to its original ownership is taxing, and the hidden requirements, stipulations, and exceptions can get businesses into trouble if not adhered to precisely. How can you navigate the Corporate Transparency Act effectively?
With experience guiding businesses through the legal landscape, attorney and former litigator Trevor Riddle understands the reporting requirements of the Corporate Transparency Act. He maintains that any person or entity owning 25% or more of a company must be listed on the beneficial ownership interest report. This includes shareholders, members of a board of directors, and anyone who can make decisions on the corporation’s behalf. You must also include any individual responsible for filing the initial company creation documents. However, you aren’t required to list these individuals on the beneficial ownership interest report if the entity was created before January 1, 2024. Additionally, if you decide to acquire an additional partner, you must update the report.
Resources mentioned in this episode:
- Mat Zalk on LinkedIn
- Keyrenter Property Management
- Keyrenter Property Management in Tulsa | Oklahoma City | Arkansas
- Keyrenter Property Management email address: [email protected]
- Trevor Riddle on LinkedIn
- Riddle Law
- “Renting to Own: The Advantages of a Contract for Deed” with Brook Reutter on The Same Day Podcast
- “Closing the Deal With Real Estate Investors” with Scott Reeves on The Same Day Podcast
Sponsor for this episode…
Keyrenter Property Management:
This episode is brought to you by Keyrenter Property Management.
Keyrenter Property Management is a full-service property management company that helps clients buy, renovate, and operate real estate assets.
The team helps clients build wealth while taking the headache out of property management.
That’s why, no matter what rental you have — single-family homes, condos, townhomes, or apartments — they can give you the management solutions you need.
To learn more about their services, go to https://keyrenterpmc.com/ or send them an email at [email protected].
Episode Transcript
Intro 0:05
Welcome to The Same Day Podcast where we discuss driving incremental business growth and other topics related to real estate, property management and entrepreneurship. Now to the show at hand.
Mat Zalk 0:20
Mat Zalk Here I’m the host of The Same Day Podcast where I connect with top business experts in real estate leaders past guests include Brook Reutter talking about contract for deed versus lease to own options Scott Reeves the Chickasaw Community Bank talking about commercial banking options says great podcast worth a listen for sure, especially in these changing interest rate environments. Today’s episode is brought to you by Keyrenter Property Management, Keyrenter Property Management we are a full service property management company helping our clients buy, renovate and operate real estate assets. We help our clients build wealth while taking the headache out of property management. And that’s why no matter what rentals you have single family homes, condos, townhomes apartments, we have the management solutions you need go to keyrenterpmc.com or email us at [email protected]. Today’s guest is Trevor Riddle. Trevor is a seasoned attorney with 20 years of niches and nearly 20 years of experience practicing people law as he calls it, and we’ll hear more about that here shortly. from real estate and business planning to protecting individual freedoms, Trevor has built a reputation for serving clients with empathy, understanding and trust. Trevor serves clients throughout Oklahoma and Kansas. Trevor riddle, Esquire, welcome to the show. Are you actually an Esquire Is that Is that like a correct is Esquire like a specific type of attorney that you are the person in like old England that was you know, is there Esquire and barrister or something like that?
Trevor Riddle 1:43
I think all attorneys qualifies. Esquire. It’s one of those series of letters, you can place your name. I’ve never used it as a seeing too fancy for me. Yeah. So
Mat Zalk 1:54
I mean, the resume you can put on your little like, Esquire wig and pretend we’re an 18th century.
Trevor Riddle 2:01
That’s right. I need a white wig and powdered face and yeah, they call her and things exactly.
Mat Zalk 2:09
We’re gonna talk about the Corporate Transparency Act, individual ownership information, all that stuff. But before we get started, tell us a little bit about yourself your Esquire credentials, if you will. You and I have worked on some other stuff. Besides Corporate Transparency Act stuff, namely Wills, Trusts probate, whatever, that kind of stuff. Why don’t you just tell us a little bit about you? Yeah, so
Trevor Riddle 2:34
I will. I’m born and raised Oklahoman grew up here just outside of Oklahoma City, proud graduate and alumni of Oklahoma State University that may offend some of our viewers. Well, you know, you know, it’s it’s just something that kind of goes with the territory it is it’s the way it is right if if someone doesn’t want to come work with me because I’m
Mat Zalk 3:03
still battle in our office, my God, I’m gonna like blimey
Trevor Riddle 3:08
at the, at the at the risk of offending even more people. I will say that I went to my I got my JD and became an Esquire at the University of Kansas School. Another big 12
Mat Zalk 3:23
I think we can end it here. There’s not going to be in this in this session.
Trevor Riddle 3:29
Find someone else to talk about this top. So just kidding. Yeah. Anyway, so I went to law school, University of Kansas, I graduated there to Lesson five and for the next almost going on 20 years now, practice, when I’ve heard other people refer to as people. So I represent individuals and small businesses who are owned by, you know, macadam, I like to work the mom and pop businesses are starting off small businesses to really help them solve problems and hopefully avoid problems which kind of brought us to this conversation today, which is the Corporate Transparency Act and all the uncertainty wrought by it.
Mat Zalk 4:11
This is a 2021 piece of legislation that’s just now kind of coming into effect. Is that right?
Trevor Riddle 4:17
Yeah, strange. Strangely, this, this law really kind of flew under the radar for a long time. Even many practitioners that I talked to other lawyers CPAs, you know, other professionals, who are we’re going to have to deal with this, you know, until almost many people even as late as last year, didn’t really know much about it. Yeah, it was it was titled The Corporate Transparency Act. So it was passed by Congress in 2001. became law. He doesn’t wander to service or to as a 21 Sorry, 2021 I had terrorism on the mind. So I went back to lesson one, but and the reason for that is because without going too deep into the weeds, I mean, a lot of people may see this law and see some of the requirements and think, you know, just another, another government regulation overreach, but they’re right. But there is some some legitimate interest that the Congress has had in dealing with this. And so it really comes down to the ease at which people can start businesses, which is a good thing in this country, this country continues to be very friendly towards small business, including making it pretty easy to start a small business. So think of, you know, for most people, that’s going to be an LLC, right, a limited liability company. Most states, Oklahoma included make it very easy to do start, one of them’s right, you can literally go to the Secretary of State’s website, fill out an online form, pay $100 filing fee, and you have an LLC. Yeah, that’s great. It makes it easy for small for small business owners, people looking to get into business to kind of get going with that formal structure. It’s also generally pretty private, for most states, Oklahoma included, you have to provide very little information about who owns that particular business. And so again, all great for business, those, the ease of creation, and the kind of limited information that has to be shared, has also made it very useful for people who might be up to more nefarious things. So money laundering, protect, and particularly financing of terrorism. So I went back to Lesson One misstatement there. And so honestly, the United States has been under a lot of pressure 10 for 10, or more years to kind of be more proactive about tracking money as it flows through some of these business entities. You know, most people probably heard the term shale company really thought maybe much about what that meant. That’s kind of what it means, right? You can have an LLC that owns an LLC that owns an LLC that owns an LLC. And it’s very hard to track back who actually the people behind the ownership. And because of that, it’s become pretty easy to, for other people to engage in acts of illegal activities, money laundering, and terrorism, other things. So So Congress had a pretty legitimate interest in trying to get out in front of this. And that’s what brought us the Corporate Transparency Act,
Mat Zalk 7:33
who’s who’s been putting pressure on the United States, other countries, other
Trevor Riddle 7:38
countries, it’s really kind of an international efforts, right. So it’s international effort to fight terrorism. So when other
Mat Zalk 7:45
countries then are more transparent in their business ownership?
Trevor Riddle 7:52
What I think yeah, I mean, I don’t try I’m really not an expert on international business. But there are certainly countries who are more who have taken kind of a bigger swing at trying to create more transparency, or at least allow certain government entities to track this information. Got it. And this, you may get a bit into the weeds. But, you know, for those people who are concerned about this being another, more government overreach and having to just provide more information to the government that’s out there for anybody’s use. Thank ya. The Corporate Transparency Act on the rules had been put in place are, are in part intended to keep the information that’s disclosed throughout the call these beneficial ownership reports. Mostly sa mostly secure and private. So they’re not just a matter of public record. So no, you know, Dicker Jane can go online and look up your your company’s beneficial ownership report until
Mat Zalk 8:56
Snowden or anonymous or somebody had that absolutely launches a day to downplay it just says, No. Is
Trevor Riddle 9:05
fencin the government, the financial Enforcement Network, which is the kind of arm of the Department of Treasury that’s been put in place of this handling this? Oh, yeah. Are they are they up to the task of keeping all this information? Private? Yeah, you know, time will tell. But at least as well as the rules are written, the information is available to very limited government agencies for very limited purposes. And really, it’s law enforcement purposes, if you want to get down to it, right. I mean, the whole purpose of this is to be able to track money laundering, terrorism, financing those things. So because FBI basically, yeah, I mean, various certainly federal law enforcement agencies are going to have access to this as part of, you know, ongoing criminal investigations, which again, was the whole purpose behind this law. Yeah.
Mat Zalk 9:54
Okay, so let’s talk about it for a second Corporate Transparency Act, passed by Congress in 2021. On goes into effect this year, and so all companies LLC s corpse and any type of I guess they shouldn’t ask for corporations and all sorts of companies have to then register the beneficial ownership information
Trevor Riddle 10:18
with unless it is a unless you’re operating as a sole proprietor. More than likely if you own a business entity, you are going to be required to comply with the reporting requirements. So basically basically, the way a what they call a reporting company, that’s the designation for covenants required to file these reports, is, in broad terms, any company that has had, in order to create itself filed some document with its governing state agency. So as we mentioned, right, going online to the local Secretary of State’s website and filing that LLC paperwork, that’s a triggering event that would that would bring your your LLC or company under the umbrella of this reporting requirements. What’s the app with the exception of a sole proprietor who’s never filed any sort of document, you’re just operating a business without any sort of formal recognition by the state. Without exception, the vast majority of businesses are going to at least initially, come under the gambit of this is
Mat Zalk 11:31
just so I understand that sole proprietors is somebody who has no protection afforded under an LLC. So I’m Johnny pool cleaner, and I’m operating as Johnny pool cleaner. And if somebody Sue’s me directly, they’re not suing any sort of business entity. They’re suing me Johnny, the pool cleaner,
Trevor Riddle 11:45
you may be you may be Johnny, the pool cleaner, and you may have a business card that says Johnny, the pool cleaner guy, and that may be your business, pay your operating. But for for all intents purposes, you’re just you’re just Johnny, right? And, and the reason for that is because so when you go to file your taxes every year, you’re you’re filing taxes, your income just comes in on your personal income tax. So your government’s not worried about those folks, because they’re tracking you by way of your personal income tax returns.
Mat Zalk 12:15
So under the corporate trends, under the Corporate Transparency Act, who needs to then go in and file this? beneficial? What did you call it, you called it a bo? D. Oh, it’s
Trevor Riddle 12:26
called a technical, it’s a beneficial ownership interest report. So it is through fan center to report any person or entity that has a, quote, beneficial ownership interest in the company.
Mat Zalk 12:41
So if I have a company, and as 5050, I go in and I do a bo IR. And then I tell my partner in this company, you also need to fill out a boi IR? And if my partner doesn’t, that makes me look bad or what? So
Trevor Riddle 13:00
yes and no, both. So let’s take that example you have let’s say you have an LLC, you have two owners, 5050. Owners, yes, each of those owners would have to report their beneficial ownership interest. The difference is it actually is done on just one reporting. So you file one report, the cup there were so what they call a reporting company would be your company. So ABC LLC as the company, you you file a report on behalf of that company. And that single report requires you to disclose all persons or entities that are qualifiers to having a beneficial ownership interest. So it’s, it’s Yes, both people are reporting when it’s done under one single report with
Mat Zalk 13:43
Benson got it. So then if there’s 10, if there’s 10 individuals and whoever is taking charge at this ABC, LLC, I say, I’m Mat, and I’m going to take responsibility for doing this. And I’ll go ahead and then report all 10 of your names. Correct. So that that that, I guess answers my next question, which is, in this case, you know, my second partner, the person that owns 50%, of the LLC, and I no longer speak, we’re at odds and he doesn’t want to go or she doesn’t want to go report this thing, it’s not going to, it’s not going to affect me because I just put his or her name down, along with the social security number or whatever you have to do. And then and then the company is protected, in essence has done what they need to do according to the Corporate Transparency Act . That’s correct. So what’s so what’s so complicated about this? There are
Trevor Riddle 14:29
some gotchas involved in this, right. So obviously, so we’ll just kind of start here with this with basically what’s required to be provided defense and one of these reports, so obviously, we just mentioned that right? They call it a beneficial ownership interest. So that will be any person or entity that owns 25% or more of the company, that’s pretty easy to determine what’s less easy to determine you is what they refer to as a person or entity who has a controlling interest in the company. So this would be anybody, any person or entity, who has some level of control, and exercises that control on quote on behalf of the company. So let’s say you have a small corporation, you know, closely held corporation. And so you have basically shareholders in that corporation. But the corporation, the shareholders have also created a board of directors. So you have an executive director of the board, you may have other members of the board who exercise decision making power on behalf of the corporation. Those individuals are also likely required to be listed on the beneficial ownership interest report, because they exercise control on behalf of the company, even if those people don’t have any ownership interest in the company itself. Wow. So it’s the same subject? It can be, yes, it can be. You know, the frankly, example I gave this is probably one of the clear examples of when you would have somebody or more than one person exercising control on behalf of a company. Yeah. But you can certainly get into the weeds here where it becomes very unclear as to whether someone’s exercising control, quote, unquote, on behalf of the company, and
Mat Zalk 16:32
then it just seems like in the event that some federal agency or FinCEN believes that somebody has control, they would have to take you to court and iron a lawsuit to determine whether somebody has control of an entity. It seems I mean, I’m married, you’re married? Our spouses have way more control than we, we may want to admit. So do I have to put my spouse on a on a? I mean, I may go to my spouse and say, Do you think I should sell this property in an LLC that I own? She may say, No, I don’t think that’s a good idea. Is that control? I mean, it it is control? Do I need to put her on as a beneficial owner for an entity that she has nothing to do with? No,
Trevor Riddle 17:12
you bring up a good question, then that’s actually a question that has been asked. I’ve heard by others, particularly, not so much in Oklahoma, but in states where, again, we could don’t get too deep in the weeds here. But in states where marital property is considered a community property state, so states, like California, for example, are considered community property states where spouses are deemed to equally own assets. You may ask you that question has been brought up, we’re in a community property state is the spouse, you know, husband is listed as the the owner of the LLC. But is the spouse considered a quote unquote, beneficial owners owner of that company, because they are it’s community property. But there are a lot, again, you can get very deep into the weeds, I do a lot of work, as we mentioned earlier with folks doing estate planning. And there’s a lot of overlap, they are working with individuals, setting up their personal estate planning documents, a lot of times, you know, somebody has created a trust for their personal estate planning vehicle. And maybe they are looking at transferring ownership of their LLC over to their trust, again, for estate planning purposes. Well, now that trust becomes an owner of the LLC. How do you How does that get reported on this beneficial ownership report? Yeah, you have to list the trustees, some people have suggested that you may even have to list out the beneficiaries who are named in the trust, and when these beneficial ownership reports. So those things are when you get into a lot of these of one off or less clue less evident scenarios or things that really at this point, are very much unknown, and are still very, in a very gray area. But I will tell you what I am, you know, anytime that you are subjecting yourself to the potential of criminal prosecution, what I tell clients is until you don’t want to be the test case, is what I tell people. And so until then, until someone else has been the test case, we have clarification, either from the courts or from FinCEN or Congress is, you should probably err on the side of caution. Because at the very minimum, you’re risking significant fines that worst your people are risking criminal prosecution.
Mat Zalk 19:32
And so on the I’m on the E filing boi website right now, I’ve done a couple of these. And so you just go to when you go through these, you got a beneficial owner and you just you just keep adding people’s names together the 20 people I mean, I’m trying to think I was in. In real estate, it’s very common to have a general partnership and a limited partnership and they may be one entity and they may be two entities right? So for an asset that I used to own an apartment complex, we had the general partnership with three general partners We’d put all those beneficial on. And then in the limited partnership, which is a separate it was, you know, the ABC property, LP, meaning limited partnership, we are all three of us in the general partnership, we’re also part of the limited partnership for different cap stack, part of a different capital stack. And so we’d put all 25 people that were in that limited partnership. I mean, it’s, it’s crazy. And then the question is,
Trevor Riddle 20:20
yes, every single one of those entities is required to file as it is, is, again, with some exceptions, which we can talk about. But very frankly, I’m sure most of your listeners are probably not going to fall into one of those exceptions. But yes, for most business owners, each of those entities is going to be considered a reporting company subject to the requirements, just think
Mat Zalk 20:44
like, at some level becomes insane that for the spouse example, if, if they really wanted if they started digging into one of our LLCs, and they said, Well, who’s there who are the real beneficial owner wages, turns out your spouse has a controlling interest, she can make a decision, you know, at night, in the in the marital bedroom or whatever. Like they can come to you and say, ABC LLC, show me your operating agreement. Tell me like your spouse’s here, like they can do all that digging during some sort of deposition during discovery of a lawsuit. So why do they need that? And like, why can they catch you in this trap? Anyways, it seems insane. But you were talking about a couple of edge cases, the first edge case that you mentioned again, say one more time, and then we’ll talk about the second.
Trevor Riddle 21:28
You Yeah, we have the the well, one, I wanted to jump to VSI. Unless I missed it. Oh, the control, obviously, is the is the first one. This brings me to the the second gotcha on this. And that is that not only is the the company itself, so what they call the reporting company required to to report itself, but the individual who was responsible for filing the initial company creation documents. So in our example, the LLC that gets by the Secretary of State, the individual that was responsible for actually creating and filing that document also has to be listed on the beneficial ownership interest report. So before we were started recording, I gave the example of my practice, right, so I help a lot of individuals who are in their business, entity creation. So I will be the one who goes online and logs into my account, their state and files on their behalf, the Articles of Organization for their LLC, because I’m the one that actually physically filed that document online with the LLC with the Secretary of State, I’m required to be listed on the beneficial ownership interest report. Now, there are some caveats to that. Because Because why, though,
Mat Zalk 22:57
hold on, because you may have been a part of forming the money laundering nefarious thing, okay. And and what and the, you see, you’re an ultimate beneficiary of the nefarious act of the proceeds of the nefarious activity. Or you are somehow in cahoots, I mean, it’s a little bit like the immigration checkbox that says I am not a terrorist, nor have I ever, you know, been involved in terrorist activity so that if somebody is found to be involved in terrorist activity, they can go back to the if nothing else, if they can’t prove anything else, they prove something. And then they go, Look, you lied on your immigration checkbox, please leave our country. So it’s like another kind of?
Trevor Riddle 23:42
I would I would love to know exactly what Congressman Benson’s motives were for going to kind of that level of reporting. I’m not sure I can give you a great answer to that other than to say, I think they were very interested in making sure that they identified on an individual level, everyone involved in the creation, ownership and operation of a business entity. And so I think that’s probably why the level of detail now there is there is a caveat to that because I think Finn sand recognize just how onerous it would be to to make every business entity. Yeah, those particular those are already in existence prior to January 1 2024, abide by each and every single one of these rules. So for instance, one of the caveats is if it is a business entity that was in existence prior to January 1 2024. Those companies are not required to list the individual that actually filed their entity Formation Documents. Some of these companies may have been around, you know, let’s say your company have been around for 20 years and 20 years ago, you hired some attorney to file the documents for you may not know that is now or even remember. So they gave some leniency on that. So that requirement is only moot kind of moving forward. So for business entities that are formed on or after January 1 2024, that kind of extra filing requirement is in place.
Mat Zalk 25:21
So, let’s So let’s consider then another 300. Let’s call it a round numbers. 300 million Americans, 5% of them 15 million Americans will have a business entity and I’ve no clue whether that’s insanely high, insanely low or relatively
Trevor Riddle 25:35
low, actually, it’s low by about the estimate is your low by about
Mat Zalk 25:39
half? Sure, there’ll be 30 million what people that own or entities
Trevor Riddle 25:47
have these beneficial ownership interest reports that will have Okay,
Mat Zalk 25:51
so I was thinking the average person would have to so I’m roughly right. So there’s 5 million, you know, sorry, 15 million business owners, and the average owner probably does not just have one business, they’re gonna have more than one business. I mean, I’m an outlier, we have 15, or something, various real estate, and many real estate investors have have tons of different entities. So you’re gonna have 1530 45 million of these things. The question is, how is the government going to access this, you know, have this database be able to use it for anything, we have 4530 to 45 million line entries in some database somewhere that they can query with various like, how many I saw the other day, I was looking at a, an LLC, and it was a masonry company. And they had left out the n. So it was like masonry, like ABC masonry, okay, well, all the general liability documents, the in the in the 1099, say masonry, and now that the entity with the Secretary of State actually says masonry. So like, there’s all sorts of these Scriveners errors, they will continue to be more and more scripters errors associated with the filing of these actual entities, I doubt the masonry company is going to recreate that same error when they file the thing. So you’re gonna have dirty data inaccessible, due to its quantity, and then you’ve got various entities that can access it and probably mess up the database at some levels or start changing things around. And then you’ve got data breaches, who’s going to dump the first who’s going to crack the database and then make the first dump of everything that Donald Trump owns, or whoever else is, it’s a little bit daunting, quite scary, and seems, of questionable impact. But I guess this is the nature of the federal government. They
Trevor Riddle 27:41
all valid questions and concerns, you know, the the, how will this be enforced? And policed is always a valid question. When you have a law and a rule that’s put in place, it’s brings under its umbrella, so many people in entities, Iran, I mean, the shooter may think of that, I mean, again, the estimate right now is some 30 million business entities currently in existence, who will be required to file these reports. The other estimate is somewhere in excess of two to 3 million new filings every year moving forward. So that’s between new business entities being created. Because keep in mind, just because you file these things once doesn’t mean you’re done. If you ever make any change to your business, you’re required to update that final address or what sort of what sort of changes in beneficial ownership. Okay, so let’s go back to our to owner LLC example, you know, if you mentioned that you’re not communicating with your partner, if you decide to buy out your partner, now, you know that that partner is gone, you know, oh, 100%, you’d have to file a new report, or you bring in a third partner, now, you each on a third, you’d have to file an updated report to add that new beneficial owner, or, frankly, to the corporation and you change directors, you may have to file a new report, because you may now have a director that’s exercising control the half of the corporation. Yeah.
Mat Zalk 29:17
I mean, I wonder if there’s also, for companies that used to do business in an LLC name that have now retired the LLC name, will they need to? Well, that that will just kind of die in the database? I guess they don’t need to actually report the closure of that presumably.
Trevor Riddle 29:34
Correct? I don’t think so. And that is in and that’s also actually one of the exceptions to entities that would have to file so let’s say you have a you have a business entity that’s it’s kind of gone dormant, you know, using there. There are, it is part of the exception to the entities that are required to report now. There are some other things that go along with that. So it’s not just that it’s a dormant entity, there’s factors that go along with it. But yes, dormant or kind of abandoned entities could follow it fall into one of the exemptions. The other exceptions are things like banks, savings and loan departments. CPAs are not subject to it, I think probably because they have some fairly rigorous reporting requirements on their own. Any business that’s required to register under the Securities and Exchange Act, generally is exempted from this because they’re, they generally have their own reporting requirements that can be tracked. So those are exemptions. One exemption that could apply to folks is if the company employs more than 20 people on a full time basis. And on their last year’s tax return, they have reported more than $5 million in revenue. They are also
Mat Zalk 30:54
they don’t need to file. Correct. What’s the logic there?
Trevor Riddle 31:01
I think because of the size of the company, basically, I think the way this came about is large companies, certainly publicly traded was and then even in larger ones, are subject to other rules and regulations such that their ownership is generally known or can be easily more easily determined. You know, the real the real vehicle for again, this illegal activity are these kind of small, really LLCs. single owner or LLC, again, I kind of have that the LLC that’s owned by the LLC that’s owned by the LLC, or LLC, right? These kind of these shell companies that really have no really business activity, they have no employees, they have no assets, they’re just there to move money. Yeah. So I think the thinking was, if you have a big enough company, why they set it at 20 employees, who knows why $5 million? Who knows, they just they have to set a threshold somewhere. At some point, you’re a big enough company, even if you’re an LLC, that we’re not going to require you to file these ownership interest group. It’s so interesting to have your report
Mat Zalk 32:09
in more than $5 million. I don’t think there’s anything on the tax that that on your tax return that indicates how many employees a company would have had? I don’t recall seeing anything on my filings that say?
Trevor Riddle 32:23
I don’t think so other than you’re probably. I mean, you’re if you have full time employees, you’re going to be generating W twos. Yeah. So that the IRS is going to know that how many shoes you’ve issued. So that will be the way they would likely track it.
Mat Zalk 32:38
Yeah. Interesting. So if somebody wants to not navigate this road on their own, but rather have a professional, namely an Esquire handle some of this Corporate Transparency Act and be Oh, IR filings done for them, how do they reach out to you? And what do they need to give you? What sort of details do they need to provide to you so that you could handle this for them, make sure they’re on the straight and narrow? Yeah,
Trevor Riddle 33:09
I’m always happy to talk to anyone small business owner about this, I will say just so your listeners kind of understand the scope of this, the fencin has kind of implemented a kind of staggered approach to enforcing this. So if you if you have a business entity that was formed prior to January 1 of 2024, you have until the end of this year to file your beneficial ownership interest report. So they give you a full year to do if you have a business entity that was formed, basically during 2024. So after January 1, but before December 31, they give FinCEN is giving those entities 90 days to file their initial report. After that, any business that is formed by essentially after January 1 of 2025, the standard rule will be 30 days, so 30 days after entity formation, the left filed, the same goes for any change in report. So let’s say you have a company that was in existence prior to January 1, say on January 1, then they filed their beneficial ownership interest report. And then in June, you know, they added a new member to the LLC. They’ll have 30 days then regardless of when they were formed to file an amendment report, so
Mat Zalk 34:36
I can see how the Secretary of State can upload a spreadsheet a CSV or Excel file and report it to FinCEN. And incent can say hey, these, these new companies that were formed on January 1 2025, hadn’t reported within 30 days been adding a new member to an LLC as an operating agreement change. That’s not submitted for any sort. have oversight. How would they have any clue? Unless by?
Trevor Riddle 35:03
Yeah, that that goes back to that. How are they going to enforce and police this? And that’s a that’s a good question. I don’t know. Yeah, you’re right. Because for instance, in Oklahoma, there’s nothing there very limited filing requirements. When I say state, I mean, you’re required to file a yearly, an annual certificate that doesn’t require you to disclose ownership. So I’m, I’m not sure. But yeah, so yeah, so to go do to go to back to the question you pose there, I’m always happy to talk to small business owners about this. Give me a call, I can give you a phone number email, I’m always happy to do that. If you want people who want me to handle this for them, I’ve tried to make it as easy as possible actually have kind of an online questionnaire that folks can go on fill out, it will provide me with the information that I need to submit that report for you, including uploading a you went through this. So you know, this requires uploading an image. Usually either for most people, it’s probably gonna be the driver’s license. So for each beneficial owner, you’re required to provide fencin with one of the few varieties of formal identification. So that’s either a valid driver’s license, a valid state identification or a valid passport. I think there may be a couple of others, but for most people, it’s gonna be a driver’s license, maybe a passport, but you’re actually not only required and provided that your driver’s license or passport number, but an actual image than that document. So the questionnaire I have as a as a document upload, so you can take a take a picture of that with your iPhone and upload it. And that way I have that to submit. So is this.
Mat Zalk 36:46
I mean, there’s there are huge numbers of new businesses started every year that are attributed to immigrants. Many I presume, legal many illegal, does this stop a an illegal somebody that has come into the country illegally, but wants to, you know, provide for their family? And does lawn care services construction, you know, auto painting detailing that kind of stuff, and it prevents them from from being in compliance with this. It’s just another yet another obstacle for them to kind of go on their way and open a new business, I guess, because they don’t have a state issued ID driver’s license, whatever else?
Trevor Riddle 37:34
Yes, yeah, potentially. Now there are, there are within these reporting rules, some separate procedures for foreign entities, individuals or entities owning having a beneficial ownership interest in a domestic company. So the rule reporting rules are a little bit different. I haven’t delved into those deeply yet. And I’m certainly also have not an immigration attorney or an expert on that. So what other rules will be in place for perhaps non citizen to own a business? wouldn’t comment on that, but I do believe there are. There has been some effort within this this fin sense procedure to allow for foreign nationals or for foreign entities to report their beneficial ownership interest.
Mat Zalk 38:26
Well, what’s the website where people can go and start filling out some of those forms if they want your help? Navigating? Yeah,
Trevor Riddle 38:33
easiest way to go is to go to my website, there’s an easy contact form there. So it’s just, it’s riddle.law is the website. So read all about law, we have an easy contact form there, you can fill it out. Or you can even schedule a quick call with me right from the website. So that’s usually what I ask people, they’ll go there, schedule a call, we’ll take 15 minutes to talk kind of get an idea about their business, and then move forward. Then I just send them the short online questionnaire, they provide the information and I kind of take it from there.
Mat Zalk 39:09
Cool. Trevor Riddle is a seasoned attorney with nearly 20 years of experience practicing what he calls people all people are from estate and business planning to protecting individual freedoms. Trevor has built a reputation for serving clients with empathy, understanding and trust. Trevor serves clients throughout Oklahoma and Kansas. Trevor, we appreciate you being on the show and telling us a little bit about the Corporate Transparency Act and associated filing requirements.
Trevor Riddle 39:37
Mr. Zalk has been my pleasure, sir. Good
Mat Zalk 39:39
to chat. Thank you. You too. Take care.
Outro 39:45
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