Is Your Business at Risk? Mandatory BOI Reporting Explained

Kevin: [00:00:00] On this episode of the Hidden Money Podcast, we are excited to have Matt Risenmay with us. Matt and his team of legal professionals are specifically designed to file this new beneficial owner information report. This is coming down through the Corporate Transparency Act. 

It is squeezing, potentially, every taxpayer out there that has an LLC. So, we are in desperate need of a solution for this BOI. If you've been listening to the news, or if you already have an attorney on retainer, or anybody you're working with on the legal or CPA side of things, you've probably heard about this report, and that's why we're excited to have Matt today. 

We're going to walk through the filing mandate and provide y'all a solution, a cheaper, quicker solution to get this report done and stay in compliance. So, Matt, welcome to the show.

Matt Risenmay: Thank you. It's good to join you, Kevin and Mike, and yeah, great to be here.

Kevin: Yeah. Just tell us a little bit about yourself, your company, and you got 18 people with you. It seems like this new filing mandate put on everybody is, kind of, working out for you and your business, but tell us a little bit about it.

Matt Risenmay: Yeah. So our company is called CTA Integrity. We are growing quickly, and we're going to continue to keep adding people. Our company is based on some new legislation that just went into effect on January 1st this year, the Corporate Transparency Act, and our name, CTA Integrity, stands for the Corporate Transparency Act. And we're growing quickly just because it's a new law that is sweeping, and impacts most small businesses in the United States. 

We started our company about a year and a half ago, because we noticed a need in the marketplace, with this new legislation coming out, that was going to impact so many different businesses, to basically, help small business owners be able to navigate the complexities of the Corporate Transparency Act. 

And make sure that their businesses are protected, that they didn't have to become a subject expert in legal reportings and compliance issues, and that they could focus on growing their business, and have peace of mind.

My other partner, who's an attorney, handles our operations team, who handles all the processing due diligence and filing services. And we work with small business owners to make sure that they avoid any of those crazy financial penalties from the federal government, and make sure that businesses are protected.

Mike: I'm glad we were able to find a firm like yours that we could partner with. This law, I'm just going to be honest, I don't like it. I think it's unconstitutional, and at least one judge in the country agrees with me so far. But whether it's constitutional or not, the government is mandating it, and you don't want to be on the wrong side of the government when they're saying, "No, this is legal. You need to do it." You don't want to be the one like we've seen other people say, "No, it's not constitutional," and then, get put in jail, or pay a bunch of penalties. [00:03:00] 

So, we're glad we found you. It's still up in the air in a lot of states where their CPAs can even be engaged to prepare this BOI report. Some states say that it's the practice of performing legal services.

I don't see why it's that way, but our own liability insurance said, "No, you need to work through a lawyer before if you want to provide this to your clients." So, it's still a lot of stuff up in the air, and we're glad that we found someone that is at least figuring out and pioneering how to navigate these complex, unnecessary and unconstitutional laws.

So, thank you for being here, Matt.

Matt Risenmay: Yeah, and to that point, this is a new law, and so, everybody's kind of figuring this out as, as we go along, and states are, "What kind of reporting is this?" It's definitely not a financial or a tax reporting requirement.

Nobody has really definitively said, is it a legal requirement, but because of the gray area associated with it, there's a lot of professional liability carriers that are just like, "Hey, listen,” because it has nothing to do with the CPA, for example, because it has nothing to do with taxes, because it has nothing to do with finances, and because of the

the huge penalties that are attached to this, they're saying, "You need to steer clear of this. Don't touch it. Don't take on the risk and liability. Either have your clients try to figure this out themselves, or to work through an attorney," which, most small business owners don't have an attorney on retainer that they can just pick up the phone and call.

That's the solution that we provide. We say, "This is what we specialize in. We have a team of legal professionals and attorneys. "We can basically make that same type of experience, and that same type of liability protection available to small business owners of all shapes and sizes.

Mike: So Matt, we're talking about the CTA and the BOI reporting as part of the Corporate Transparency Act. Can you kind of give us the background of what is the CTA? When was it passed? What is the intent or the motivation of our government and FinCEN for coming out with this, and now mandating it

Matt Risenmay: Yeah. So, the Corporate Transparency Act was passed in the latter end of 2021, and basically, the purpose of the law was to, I guess, for lack of a better term, have more transparency around corporate ownership because of the way that business entities are set up right now. Companies are set up, business entities are set up at the state level, and different states have different requirements as far as what needs to be reported to the government for that business. Certain states have very little requirements. Certain other states have a lot of requirements. 

There is a small group of businesses or business entities that are set up without any intention of actually running a legitimate business. [00:06:00] There's companies that are set up to launder money, and to finance terrorism and to, basically, engage in other illicit business activities, especially with certain states where you can set up what's called a blind LLC, where you can set up a business, and you can own it and operate it completely anonymously. 

The federal government wanted there to be a standardized reporting process, at the federal level across all 50 states and US territories, so that they could understand who personally owns or operates every single business entity in the United States, as a way to combat money laundering and illicit business activities.

Mike: One of the big pushes from lawyers and attorneys for state and asset protection planning, they have this concept called 'anonymity,' and they say it can really help a lot to keep from you getting sued for unreasonable reasons, but it seems like the CTA just basically took that away.

Kevin: So, Matt, when this first hit the ground, Mike and I were really excited from a business owner standpoint, of actually filing this report because all of our clients who have LLCs are probably going to have to file this thing. But when it came down to it, and we got more into the details of what this report is, and we talked to our insurance carrier, he was not going to insure us as CPAs to file this report.

He said, this is practicing law. You're getting, kind of, out of your wheelhouse. If you botched this BOI report, our malpractice insurance wouldn't kick in. So, Mike and I, our hands were kind of tied. Our clients are in desperate need of filing and having a solution for this. We can't help them.

So, the next best thing was, "Okay, we're just going to have to get attorneys involved at $300, $400 an hour." And this report could take two to three hours. I'm like, "And they’ve got to do this every year." I was like, "This is crazy." So, that's why we're so glad we found you guys is because y'all do have those legal professionals on staff.

Y'all aren't going to be charging those rates, and so, thank you for providing this service, first of all, and helping us CPAs because our hands were tied, at first. So, tell us a little bit about the process. How do you diagnose if I'm out there and I have an LLC, or maybe I have 10 LLCs, do I have to file 10 of these things?

Matt Risenmay: Yeah, I mean, potentially. The first thing that we do is we go through and we determine No.1, does it fall under the legal requirements as far as being required to file a Beneficial Ownership Information report?

Basically what happens, is this BOI, Beneficial Ownership Information reporting requirement applies to companies that are organized as an LLC, as an organization or as a corporation, or was formed by any document. filed with that state secretary, or whatever it's called in your individual state. So, that can include, [00:09:00] depending on the state, different types of trusts, can include partnerships,

can include lots of different types of entities out there. And so, if you're a sole proprietor, where you operate under your name and your social security number, no LLC, no business entity, you're most likely off the hook. But first we determine how is the entity even organized?

And then, does it meet one of the 23 different types of exemptions? Most of those exemptions are rare, and most of those exemptions, basically, fall under an industry that is highly regulated. So, most of them are financial institutions, banks, credit unions, other types of industries that already have a lot of regulatory oversight and reporting, like publicly traded companies, nonprofits, things like that.

One of the other exemptions is what's considered a large operating company, and to be classified as a large operating company, you have to meet three criteria in the previous tax year. You had to have done at least $5 million in gross receipts or in top line revenue, currently have, at least, 20 full-time W2 employees, and have an operating presence in the United States. You have to meet all three of those criteria, and if you do that, then you would be exempt from reporting. 

But basically, what I tell people is if you're set up as an LLC or a corporation, you do less than $5 million a year in revenue, and you're not in a highly regulated industry, you are most likely required to file a BOI. So, that's the first step is just determining No. 1, are you required to report? And if that answer is "Yes," then we go through our process and we collect some information on the business, and then, its beneficial owners. 

I actually hate the term beneficial owner because it implies that it's only people that own or have an equity stake in a business. The way that it's outlined is a beneficial owner can be anybody that owns at least 25% of equity, whether it's stock, or options, or whatever in any particular business entity, or it could be somebody that has significant control over a business entity as well.

And that can be determined by either their title or their responsibilities. You could have a CFO that has zero ownership in a company and have to be included on that report. And basically, navigating through that complexity is what can make BOI reporting challenging, and which is why, frankly, lots of firms, just like yourselves, partner with our company just to make sure that businesses are protected, and that there's peace of mind.

We've done thousands and thousands [00:12:00] of BOI reports since this went into effect. When we receive their initial information to file their BOI report, our team, as we go through our due diligence process has to make an adjustment on about one-third of them.

So, had they filed themselves directly with the federal government based on our data, about a third of the people would technically be out of compliance just because, again, there's more complexity to this than what meets the eye. To Mike's point, it's crazy, but it is what it is, and we're happy to be part of a solution to help businesses, business owners with this.

Mike: You mentioned one-third of the people who have filed with you guys have made some kind of error on the data that they had submitted.

You guys have caught that and fixed it. What are the penalties? What happens if you file this wrong, or if you don't file it? Like, give me the most reasonable likely-case and the worst-case scenarios. What can happen?

Matt Risenmay: Yeah, so, there can actually be financial and/or criminal penalties. And so, the way that the law is outlined is that the financial penalty is $500 per day. They actually just updated the financial penalties. They adjusted it for inflation. So now, it's $591 per day, that a business is out of compliance, and can include criminal penalties, including jail time, if there's specific withholding, or different things going on that would constitute a criminal penalty. 

And so, as far as what makes a company out of compliance, the Corporate Transparency Act has specific guidelines on what needs to be reported for a business.

 We have to make sure a BOI report is complete, and it's accurate, and it's correct, and this is part of what our team does, is we make sure that all of the information is there. Sometimes, again, what I was talking about before, as far as what is a beneficial owner, understanding that is one that most business owners miss.

We've had single member LLCs, where there's technically one equity owner with 100% ownership, have 5 beneficial owners based on people's titles and their responsibilities within the company.

And so, making sure that we have all the right beneficial owners, that we have the addresses, the physical addresses make sense, that the business name is spelled right, that any DBAs (Doing Business As) or trade names that they operate under, or any other business entities that are associated with that business are also being reported.

Basically, there's a whole checklist of things that we go through to make sure that things are, that people stay in compliance. Companies that were formed before January 1st of this year, they have until 1159 PM on December 31st of 2024 to get this done. Companies that were formed on or after January 1st of 2024 have 90 days from the date the company was formed.

And that's only companies that were formed from January 1st through December 31st of 2024. Then thereafter, [00:15:00] companies that are formed on January 1st of 2025 and thereafter, have 30 days to file their BOI report on the date that the company was legally formed. But the trickiest part about BOI reporting is a question that comes up all the time. 

This is not something you have to do on an annual basis, that's going to be part of your annual reporting. There's an initial report which is what we do, and then, any of the information on that initial BOI report has to be updated within 30 days if there's any change of information. 

So, if there's an address change from one of the beneficial owners, if their driver's license expires, if there's anything at all within 30 days of that change happening, it has to be updated. So, we also have some tools that we employ to proactively help people stay in compliance, to be able to update those BOI reports, as those changes happen, so that people can avoid those penalties. And all that stuff.

Mike: So, Kevin and I, we have a firm, we're both beneficial owners. We're going to have to work with you guys or other attorneys to decide, does anyone else have enough significant control to qualify as a beneficial owner? Then if Kevin's driver's license expires in four months after we've done our initial report, and we don't file an updated BOI filing, we're out of compliance.

Matt Risenmay: Yeah. Technically, yeah.

Mike: And even though there's probably an allowance for good faith mistakes, mistakes that you didn't mean to make, you're trying to do the right thing, I've seen over and over again in the media, the last few years where people have made good faith mistakes and they still threw the book at them. Sadly, there's a lot of politics involved there.

Depends whether whoever's filing the charges or prosecuting is reasonable or not, or if they just have a bone to pick. What I want to get across to the listeners, as much as I don't like this all, and I think it's unconstitutional, don't give people the ability to put you in jail for whatever reason they have. 

You've got to cross your T's and dot your I's here.

Kevin: Yeah. So, it's almost regulation by fear, and it's self-regulation.

Matt Risenmay: Yeah, and just to be clear, we talk about the penalties just to make sure that people know to take this seriously. I think that those financial penalties are there for people that are intentionally withholding information, or trying to be deceitful. 

And to be frank and honest, we've come across situations like that because we work with lots of different types of businesses, even companies that are formed internationally that are registered to do business in the United States, and we've come across situations before when we're trying to file a BOI report, and something's just not adding up, and it's not making sense, and we're not getting the information, and things like that. We've had to, basically, pump the brakes on what we do with that particular entity.

That's where I think those financial and criminal penalties are really geared towards. [00:18:00] But I think the big takeaway with this is it is something that we have to take seriously, and just like all the other legal services and compliance, these are just things that you have to do to protect your business, and to keep things moving forward.

Kevin: Yeah. And we're actually going to have a solution here at Revo for you. We're going to quarterback this whole filing for you, and we're going to work with CTA Integrity directly. So, all you have to do is, we'll put the link in the show notes, but if you go to www.revotaxpayer.com, that's our website. 

On there, we're going to have links to two things. One is just going to be a short questionnaire. Am I required to file? I would recommend anyone listening, or any of our clients, to go and just see it, 'Do you have to file?' Go through; it literally takes one minute to do this questionnaire, and at the end, it's going to say 'Yay' or 'Nay'. 

If you're 'Yay', the next part is to actually do the filing. You can do that. You can submit the information right on our website. So, we're going to put the link in there. You're going to give us your name, address. It's just going to be really easy to fill out.

And then, once you click 'Submit', you could just pay on credit card. I think we're going to be charging $600 for each filing. And then, Matt and his team would be in touch with any additional information they need, but then, you're done. Submit the information, pay it, hands off. Let Matt and his team get in touch with you next.

They're going to file and handle all the due diligence for you, keep you out of harm's way. So, that's our solution for this. We originally thought we could file it. We justcan't practice law, CPAs are, we just can't. So, that's why we have these great partners like Matt and CTA Integrity.

Mike: Hey, Matt, if someone uses our site through you guys to do their BOI, and they use their driver's license as an ID. Let's say it expires in six months. Is your system jiggered to send them a notification, and even help them file it? Tell us, how does that work?

Matt Risenmay: Yeah, so that goes back to that monitoring system that I described, and that was one of the things that logistically, we're like, "This is actually the most challenging thing about this from a compliance standpoint, is just the ongoing compliance with needing to update your BOI report within 30 days, because I don't know of a person on this planet that when they move, or when their driver's license expires, is automatically going to think, "Okay, I finished up with the DMV, now I've got to go update my BOI report with FinCEN.” Nobody's going to think that.

We use a combination of public information, information that we already have, and then, just some regular outreach and things like that, that we do just to make sure people stay in compliance.

So, with your example, we already know from that initial filing when somebody's driver's license is going to expire. So, 30 days before that driver's license is expiring, like in that example with Kevin, Kevin, you would get an email from us 30 days before the license even expired to say, "Hey, by the way, your license is expiring.

We're going to need an updated copy of your ID. Here's a link where you can upload it, [00:21:00] and we can take care of updating that BOI report on your behalf so you don't have to think about it.” And then, also, side benefit, you don't have to drive around with an expired driver's license when that time comes around. And so, we may save you some money in legal fines, too.

Kevin: Is that an additional fee? Because they're going to charge $600 to file the initial report, and then, if they move, driver's license, I mean, are those additional costs on top of that?

Matt Risenmay: We charge $79 to update the BOI report just as those things come up, but the actual ongoing monitor, no, that's just part of the initial reporting.

Kevin: And they will work directly with you and your team on the updates and payment and everything. Ours is the initial filing. So, that's the important one where the penalties rack up, and that's when all those kick in. So, the initial filing is very important too, then CTA Integrity will get you for the rest.

Matt Risenmay: Yep. One thing I'll add to is, we have made that filing process very easy, and we've had the federal government themselves estimate that it takes about 3 hours per BOI reporting for someone to do it on their own, to go to their own website, which is not user-friendly.

But we have made our process very easy, for lack of a better term, really dumb things down to just to get the pieces that we need so that we can start our job.

Most of the time, for most people, it takes about 5 or 10 minutes to complete that, and then, we handle everything else. There may be a little bit of back and forth if we have any clarifying questions or anything like that, but typically, from our clients' point of view, it takes about 5 or 10 minutes, and then, we take the rest off the plate.

How the Corporate Transparency Act will look for the long-term is still yet to be seen, to be known, but for the time being, we operate off of what we know, and what we know is this still applies to the majority of small businesses across the United States.

Mike: Well, Matt, thank you again for being here today. Regardless of what any of you who are listening think about the CTA, and the BOI reporting requirements, and the penalties, it's the law of the land right now. And we strongly, strongly recommend you don't give the government any reason to put you in jail. Just, just don't do it. 

Go ahead and file it. And Lord willing at some point in the near future, it will be judged by the Supreme court as unconstitutional, as I think it is, and we'll be done. But in the meantime, let me just ask a few more questions to, kind of, summarize this filing requirement.

So, the CTA and the BOI reporting requirement that applies, the only way it's going to apply to you is if you have a legal entity set up with your state, right?

Matt Risenmay: Correct. Yes. If you have a legal entity that was formed [00:24:00] by your state, LLC, partnership, corporation, then the CTA reporting requirements probably apply to you.

Mike: Okay. And then, so if you had your entity, whatever it is, LLC, trust, corp, you name it, if you had it before January 1st, 2024, you have to file by when?

Matt Risenmay: December 31st of 2024.

Mike: Okay, let's make sure that's very clear. I've seen it all over the web that you have until January 1st, 2025. That's the first date, in my understanding, that you are out of compliance, if you haven't filed December 31st. So, the filing due date is December 31st, 2024 for any pre-existing entities. Then, any entities created during the 2024 tax year, they have 90 days to file,

Matt Risenmay: Yeah, exactly. 90 days from the date, basically, your articles of organization or incorporation were stamped by the Secretary of State, saying this is now a legal entity. 90 days from that point, is the deadline.

Mike: But then, if you create a new entity, January 1st, 2025, or after that, you have a 30 day due date, right? So, once you file your articles, or once you're licensed with the state, or recorded with the state, you’ve got 30 days. And again, the most severe penalties is a lot of money and a couple of years in jail, I believe, right?

Matt Risenmay: Yeah, it's 2 years in jail, and then $591 per day, which, probably, will continue to be jacked up due to inflation.

Mike: It was $500 last year, and just recently went up to $591.

If you want to file using our partner, CTA, through our firm at Revo, you go to Revo Taxpayer Advocacy. Look atin the top under 'Services', and you'll see the filing for this. At least, fill out the questionnaire. Feel free to file on your own too.

Anything else? Any final thoughts, Matt?

Matt Risenmay: Yeah, what I would say is, we don't actually offer BOI filing services. What we really offer is peace of mind. Hey, this is what we specialize in. This is what we do. 

Everything's going to be reviewed by a licensed attorney. We will file a BOI report for you to help you stay in compliance. But ultimately, what we are providing to you is peace of mind, that your business is protected, that you don't have to worry about the government coming after you for this crazy stuff, and that you can allocate your time and your resources in the building your business, without having to worry about these legal and compliance issues.

Mike: Awesome. Well, thank you very much, Matt. Thanks for being with us.

Kevin: Yeah. Thanks, Matt.

Matt Risenmay: Yeah, you bet. Thanks guys.