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EPISODE 186: Unveiling the Importance of Beneficial Ownership Information

In this episode, Jarrod teams up with Steve Levy, a highly knowledgeable CPA and JD, to delve into the intriguing topic of BOI, also known as Beneficial Ownership Information. Discover what this crucial information means for you and your practice.

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EPISODE 186 TRANSCRIPTION

Announcer:
Hello everyone, welcome to The Millionaire Dentist Podcast, brought to you by Four Quadrants Advisory. On this podcast, we break down the world of dentistry finances, and business practices to help you become the millionaire dentist you deserve to be. Please be advised, we do speak with an honest tongue and may not be safe for work.

Jarrod Bridgeman:
Hello and welcome to another episode of The Millionaire Dentist. My name is Jarrod Bridgeman. I'll be your host today. Casey is out greeting fans, and holding babies and all kinds of stuff. So instead, I've brought in the world-famous Steve Levy Pipes. Over the weekend we had our holiday party here for the company, and at one point, the karaoke machine came out and Steve did a couple of songs for us. Steve, what'd you sing?

Steve Levy:
I sang, Let's Stay Together by Al Green and Have Yourself a Merry Little Christmas.

Jarrod Bridgeman:
And you killed it.

Steve Levy:
Thank you. And just keep mics away, 'cause it's too tempting. I'm going to go off.

Jarrod Bridgeman:
That's right, that's right. Steve, you wanted to come and talk today specifically about BOI, which is an acronym I've heard thrown around before, but I'm not super familiar with. What does BOI... What do those letters stand for?

Steve Levy:
So it stands for Beneficial Ownership information.

Jarrod Bridgeman:
Okay. And so what does that mean? What is that?

Steve Levy:
Back in 2021, Congress passed what's called a Corporate Transparency Act, and the law created a new beneficial ownership information reporting requirement as part of, they say, the US government's efforts to make it harder for bad actors to hide or benefit from Ill-gotten gains, this is direct from them, through shell companies or other strange opaque ownership structures.

Jarrod Bridgeman:
Okay. And when did you say this came into effect?

Steve Levy:
It was passed in 2021 and 2024 is when it's coming into effect. Really, starting January.

Jarrod Bridgeman:
So this is brand new?

Steve Levy:
It really is.

Jarrod Bridgeman:
Okay.

Steve Levy:
It's hot off the presses.

Jarrod Bridgeman:
Gotcha.

Steve Levy:
Most companies will have to do-

Jarrod Bridgeman:
Report on this?

Steve Levy:
... report this filing and basically, for those that typically have twenty-five percent or more of ownership of some entity, they're going to have to provide their full legal name, date of birth, residential address, a number from their passport or driver's license and an actual copy of that passport or driver's license.

Jarrod Bridgeman:
So, this doesn't pertain to a minority owner who owns a percentage or two?

Steve Levy:
Right, if it's tiny, yeah, it's not going to be them.

Jarrod Bridgeman:
And so would that be considered the exceptions? Are there any other exceptions to who may [inaudible 00:02:42] the report with this?

Steve Levy:
Yeah, there are a few. There's like 23 listings of exceptions. Some of the main ones are those that make, larger operating companies. So if they've reported 5 million in gross receipts on a prior year federal income tax return, that's one that they can get out of the filing. Maybe a large company lobbier that was able to get that through. Tax-exempt entities are also those that don't have to file. And then-

Jarrod Bridgeman:
So tax-exempt, would that be like a non-for-profit?

Steve Levy:
Non-for-profit, yeah. That's another. And then another one to note is, if you've got an LLC that you've created that really hasn't done much at all, and LLCs are roped into this, as well as really, any kind of entities except for a sole prop. If you've registered with the Secretary of State for an entity, then you're kind of on the hook, unless you have a super inactive entity that really hasn't done much at all.

Jarrod Bridgeman:
Okay. So let's say somebody out there has, them or their wife, spouse, whatever, may have a small side business as an LLC. Let's say they sell, I don't know, dolls clothing on Etsy. They're still on the hook for this?

Steve Levy:
Absolutely are.

Jarrod Bridgeman:
Okay. Even if they made 12 bucks last year?

Steve Levy:
Really minimal activity will require you to file this.

Jarrod Bridgeman:
Okay.

Steve Levy:
It's usually, well, a thousand or less is sort of the threshold. If you haven't done a thousand in a year, then you don't have to file. But a thousand's sort of the threshold for that.

Jarrod Bridgeman:
Okay. And so, if I fall under this preview here of having to report this for 2024, when does that start? When do I need to report?

Steve Levy:
So if you've had an entity that existed prior to the end of 2023, then you have to file this report by January 1st, 2025.

Jarrod Bridgeman:
Oh, okay. So we have a full year plus.

Steve Levy:
A full year, yeah. And they actually haven't gotten things together yet for how to file it. The expectation is that FinCEN, who's the Financial Crimes Enforcement Network, the ones that'll administer this, they're going to set up a website for people to file there. Optimally, they'll also have softwares, like what we use, that will allow to file on client's behalf as well. So they're still developing it, but

Jarrod Bridgeman:
But is this something that I, as the business owner, I have to go and find and do? Or is this something I will receive something in the mail about or?

Steve Levy:
I wouldn't count on that 'cause some entities-

Jarrod Bridgeman:
So we need to be pretty proactive with this.

Steve Levy:
Yeah. Some entities might not be on the radar for... It's a subdivision of the Department of Treasury, and so that's one entity that was in existence prior to 2024. If you've created an entity in 2024, you actually have 90 days, from the time of creation, to get the filing in. Now, if you've created an entity in 2025, you have 30 days.

Jarrod Bridgeman:
Wow.

Steve Levy:
And then, if you've had a change, like say, a sale-

Jarrod Bridgeman:
SO this is pretty permanent.

Steve Levy:
Yeah. It said it was bipartisan support for it, so it's probably going to be around for a while.

Jarrod Bridgeman:
Let's say, something has changed regarding the information since reporting. How does that work out?

Steve Levy:
Well then, you've got 90 days from the time that changed. Now it's either an ownership name change-

Jarrod Bridgeman:
I was going to ask what kind of [inaudible 00:06:38].

Steve Levy:
...like an entity change. Pretty much a change in what you reported previously. Which you don't have to report a whole lot. It's basically, the entity and information about the owner.

Jarrod Bridgeman:
But let's say you sold 30% of your company off, that has to be reported.

Steve Levy:
Right, yeah. And then-

Jarrod Bridgeman:
And then the new person has to report on their side too.

Steve Levy:
Exactly. Yeah.

Jarrod Bridgeman:
Okay.

Steve Levy:
Yeah, so there's changes and then the new owner reporting.

Jarrod Bridgeman:
So this is filing based upon the actual owner itself, and not so much the company. Again, because each person that has 25% or more ownership needs to have this completed?

Steve Levy:
That's right. Now it's really going to be... They say they can go after either one if there's a non-compliance for this.

Jarrod Bridgeman:
Oh, boy.

Steve Levy:
Yeah, they don't mess around in FinCEN.

Jarrod Bridgeman:
So, let's just say, I don't want to do this. What if I don't want to report on this? This sounds a lot of work. What's the punishment? What are they going to do to me?

Steve Levy:
So okay, well, there is a pretty stiff punishment for that. They've said that, okay, if it was more accidental as far as not doing it, then okay, you have 90 days to kind of correct that mistake or omission. So, no big deal. Now, if they find that you're willfully violating those reporting requirements, civil penalties of up to $500 a day that the violation occurs. And you can also be subject to criminal penalties of up to two years imprisonment and a fine of up to 10,000. So they're not messing around here at all.

Jarrod Bridgeman:
Yeah.

Steve Levy:
And this is typical from this type of reporting. Right now we have reportings of foreign bank accounts. If people have 10,000 or more in foreign bank accounts, it's also a similar filing, similar penalties, and it's kind of under that same umbrella, but they don't mess around. They really want this. Hopefully, it'll make it easy to file so that-

Jarrod Bridgeman:
It's not a hassle for everyone.

Steve Levy:
... and education. Right.

Jarrod Bridgeman:
Right.

Steve Levy:
And really, they're actually putting up a bunch of frequently asked questions, really as late as last week because there's so many questions on this. So you can go to the FinCEN website and look at those. They'll be updated. Last update was December 12th. As people are thinking about this and they're going to continually update based on the questions people have.

Jarrod Bridgeman:
So in terms of getting the most time available to work on this report, would you suggest if you're going to start an entity, do it in the next week versus the first week of January?

Steve Levy:
Yeah. I would say, yeah, squeeze it in. And we've had questions, "Do you have to file by the end of this year?" No, don't worry about filing. But hey, I've seen questions where people have wanted to restructure things like let's say, they have an inactive entity, they're thinking about closing it so they don't have to worry about that. Now there's different reasons to do that, but this might be one, they're like, there's planning going on before the end of the year. Now it's just a simple filing. It's the typical practice owner. Yeah, I own a hundred percent. I'll file it. No big deal.

Jarrod Bridgeman:
Right. And then it just kind of sits there until something major changes.

Steve Levy:
Right.

Jarrod Bridgeman:
Right.

Steve Levy:
Exactly. Yeah. There hasn't been, that's a good question on that, 'cause there hasn't really been anything as far as an annual filing. It's just sort of there. They don't say, like some other filings, that it's an annual one. Now that might change, but that's what it is right now.

Jarrod Bridgeman:
That information gets reported to the government there, who can access that information?

Steve Levy:
That's a great question. So it's not your neighbor or anyone that-

Jarrod Bridgeman:
There's not a database of this online? Or there won't be?

Steve Levy:
No. So what they say, is that they allow federal, state, and local governments, as well as, I guess, they say, certain foreign officials who submit a request through a US government agency to obtain this information for authorized activities related to national security intelligence and law enforcement. So that's what kind of drives that. They also say financial institutions will have access to that in certain circumstances with the consent of the reporting company. Because banks have to... It's another way to verify that, okay, this person is who they say they are. But in that instance, they have to get consent of the reporting company for that.

Jarrod Bridgeman:
Steve, I wanted to thank you so much for coming in today. If you're not a client of ours, it's probably best to, if you haven't heard about this yet, reach out to your your CPA.

Steve Levy:
Yeah, absolutely. And go on www.fincen.gov/boi. It's right there.

Jarrod Bridgeman:
Okay. And then of course, if you are a client of ours, Steve, you're going to be taking care of this stuff, aren't you?

Steve Levy:
That's very sure.

Jarrod Bridgeman:
That's right.

Steve Levy:
We will, we're on it.

Jarrod Bridgeman:
That's right. Steve, thank you so much for coming in today. I wanted to wish everybody out there, happy holidays and happy New Year. We're going to be taking a break after this week, since I will not be here. I'll be on vacation with my kiddos. After that, we'll be back and we'll be visiting some new areas and spreading the good word. We'll be in Boca Raton in January. And then in February, we will be in San Antonio. So, thanks again, Steve.

Steve Levy:
All right.

Announcer:
That's all the time we have today. Thank you to our guests for their insight and for sharing some really great information. And thank you to you, the listener, for tuning in. The Millionaire Dentist podcast is brought to you by Four Quadrants Advisory to see if they might be a good fit for you and your practice. Go on over to fourquadrantsadvisory.com and see why year after year they retain over 95% of their clients. Thank you again for joining us and we'll see you next time.