The Power & Purpose of Beneficial Ownership Reporting

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.

Casey Hiers:
Hello and welcome. This is Casey Hiers back at the Millionaire Dentist Podcast in studio with co-host Jarrod Bridgeman.

Jarrod Bridgeman:
Casey, how you doing? I like your bright pink shirt today.

Casey Hiers:
Pretty in pink.

Jarrod Bridgeman:
That's right.

Casey Hiers:
I accept that compliment.

Jarrod Bridgeman:
You're a regular Molly Ringwald.

Casey Hiers:
I mean, it's 90 degrees and you're wearing a sweater.

Jarrod Bridgeman:
Well, it's not 90 in my office.

Casey Hiers:
I love the earth tones, though.

Jarrod Bridgeman:
Thank you. Thank you.

Casey Hiers:
We have a special guest with us today, Steve Levy, aka Pipes.

Jarrod Bridgeman:
He's our director of accounting here.

Casey Hiers:
Yeah. He's that guy. He's an attorney.

Jarrod Bridgeman:
He's a top dog.

Casey Hiers:
He's a-

Jarrod Bridgeman:
He's real smart.

Casey Hiers:
He's an accountant.

Steve Levy:
Thanks, guys.

Casey Hiers:
CPA, JV.

Jarrod Bridgeman:
A little bit of everything.

Casey Hiers:
Yeah. Thanks for joining us.

Steve Levy:
Absolutely.

Casey Hiers:
You're regretting it already.

Steve Levy:
Gulp.

Casey Hiers:
Yeah, so it's always fun when Jarrod and I go in and go, "Steve, what do our listeners need to hear about from the world of tax management and accounting," and his eyes perked up. He's got pages, he's got tabs, he's got color codes. He's ready to rock your world.

Jarrod Bridgeman:
He's much more organized about this than we ever are.

Casey Hiers:
I'm looking at a few notes here; I don't even know what this topic is, so I genuinely am going to learn as much as our listeners are. Steve, what are we going to talk about today?

Steve Levy:
So we're talking about the beneficial ownership information reporting.

Casey Hiers:
BOI.

Steve Levy:
BOI.

Casey Hiers:
What do you call it?

Jarrod Bridgeman:
Is that what that stands for? I had no idea.

Casey Hiers:
Right?

Jarrod Bridgeman:
All right.

Casey Hiers:
Boi.

Jarrod Bridgeman:
Yeah, boi.

Casey Hiers:
Boi, B-O-I.

Steve Levy:
So what that's about is there was a quick-

Casey Hiers:
When did BOI come into play?

Steve Levy:
Yeah, so that's what the Corporate Transparency Act introduced really over a year ago. Part of that was a new reporting requirement of BOI to be filed with the Financial Crimes Enforcement Network, FinCEN, and reporting companies have to disclose detailed information about their beneficial owners and the company itself. And some of the types of information that you need to disclose-

Casey Hiers:
This sounds intrusive.

Steve Levy:
Possibly. Yeah. So the company information, there's also a driver's license needed to be uploaded and the tax ID number of the company, as well as just some miscellaneous information besides that.

Casey Hiers:
Interesting.

Steve Levy:
Yeah.

Casey Hiers:
So the government has issued a regulation or a responsibility for owners of businesses?

Steve Levy:
That's right.

Casey Hiers:
To give more information, call it a transparency act. Does this go along with the Government Transparency Act? Oh, wait, that didn't exist.

Steve Levy:
Okay. Yeah.

Jarrod Bridgeman:
Let me ask you, with the-

Steve Levy:
I was like, "I'm not touching that."

Jarrod Bridgeman:
... with the driver's license stuff, is that for everybody that's considered an owner has to submit their license into this?

Steve Levy:
That's correct. So anyone that benefits from the company in any way has to submit their driver's license.

Casey Hiers:
So if a practice owner, and let's say a spouse is on payroll, they would need to submit this information too?

Steve Levy:
No, it's really just the owner, direct owner itself.

Jarrod Bridgeman:
So if the doc and his wife both have ownership in the company.

Steve Levy:
Right. If they're both listed as owners, then that's who needs to be on the ownership reporting.

Casey Hiers:
Are there any loopholes or exceptions to getting out of this?

Steve Levy:
There are. There's not too many, though, unfortunately, but there are a few. One is if... It's called a large operating company, and that's if entities have reported five million in gross receipts in the previous year's return and have more than 20 full-time employees, then that's considered a large operating company, and so therefore they wouldn't have to. There's obviously not a ton that-

Jarrod Bridgeman:
If they do hit that level, are they underneath a different act or thing that they have to submit to?

Steve Levy:
No, not really. They're just out in reporting-

Jarrod Bridgeman:
So bigger companies can have less transparency?

Steve Levy:
Yeah, definitely.

Jarrod Bridgeman:
Okay. That seems appropriate.

Casey Hiers:
So going after a smaller company. Okay, interesting.

Steve Levy:
And also, we're not just talking about companies, but we're also talking about any kind of LLC that they may have registered. Basically any entity that's registered with the Secretary of State, LLC, professional companies, anything that's under that filing has to do this filing.

Jarrod Bridgeman:
So you can even have a part-time photography business for a hobby, and if it's an LLC, you got to still do this?

Steve Levy:
Right. Exactly. So it's pretty over-encompassing for the filing.

Jarrod Bridgeman:
Gotcha. Gotcha. So that's the most major exception. For everybody else that falls into this category, when does this need to be reported? Is it more than once? How does this system work?

Steve Levy:
So there hasn't really been a kind of repeat requirement for this. There is an initial filing, and then if there's a change, you get 30 days. But for those companies that have been in existence before 2024, you get until the end of the year of really 2024 to file it. It says January 1st, 2025, but that's when you get that. Now, if you create a company in this year, then you have 90 days from the date of formation to file it. And if you create a company in 2025, you have 30 days to knock out that requirement.

Jarrod Bridgeman:
And then in terms of changes, that would be if, let's say, a partner buys in?

Steve Levy:
Yeah, that's really it-

Jarrod Bridgeman:
Or sells out?

Steve Levy:
That's a typical change that we see for that, and you generally have 90 days from that change to do your reporting.

Casey Hiers:
Is this something that most accounting firms are aware of and do, or is it kind of hit and miss, from what you've seen?

Steve Levy:
It's really hit or miss. We've seen that there may be an extra charge for this filing. It's not a filing that takes too much to do, but it is a requirement and there is just kind of gathering of the driver's license and basic information. And just to revisit on the change, it's actually 30 days from the time that the change is reported to file that change report.

Casey Hiers:
Here's a question for you. Let's say a dentist out there 10 years ago created an LLC thinking they're going to get into some side thing. It never took off. Nothing ever happened. For all purposes, this LLC doesn't do anything, but it was technically created, let's say, 10 years ago. Do LLCs go away after a certain point of time, or do dentists and specialists who may have had some other venture or LLC that's dead, do they have to go back and do it for that? Or does an LLC go away automatically if there's no action?

Steve Levy:
It goes away if there isn't a continuous filing with the Secretary of State. Then they do what's called administratively dissolve it, and then it doesn't exist for Secretary of State.

Casey Hiers:
Is that automatic or is that something that-

Steve Levy:
It's state by state, but we've seen Indiana and others kind of do that, just dissolve it. Now for legal purposes, if you still want that LLC to exist, and we've seen-

Casey Hiers:
So it goes away unless you do something to keep it going.

Steve Levy:
Right, with the filing. And that goes to another exception. If it's super inactive, where it has no money, nothing going on at all, that is one of the exceptions as well besides the big one. It goes to extremes. Large operating company or super inactive LLC that's just kind of sitting there with no money, no activity, that's another one that could possibly be under it.

Casey Hiers:
Because I talked to a lot of practice owners who in the past, maybe they have created an LLC for something, but it never did anything. And so that's 10 years ago, they don't need to worry about it necessarily.

Steve Levy:
Right. But couldn't hurt to err on the safe side to file it, especially if you've continuously filed your Secretary of State filings, which are generally annually or bi-annually, just to be on the safe side.

Jarrod Bridgeman:
So what happens if I don't want to do this?

Casey Hiers:
I know there's listeners out there that were thinking of that, right?

Steve Levy:
Sure. Yeah. So there's a problem with that-

Jarrod Bridgeman:
Is it straight to jail?

Steve Levy:
Not exactly, not straight to jail, but there are-

Jarrod Bridgeman:
A couple pit stops?

Steve Levy:
Steep penalties. So we're talking about $500 per day for each day that it's late.

Jarrod Bridgeman:
Oh, wow.

Steve Levy:
So you want to get it there on time.

Jarrod Bridgeman:
So make sure to set a reminder on your calendar.

Steve Levy:
Yeah. If there's willful failure to provide it, then we're talking criminal penalties, including imprisonment for up to two years and/or a fine of up to $10,000. It's the FinCEN group, and they're not going to mess around. That's why they're wanting all this information. And I guess getting to what they say they're going to use it for, they say that they want this, it's related to national security, and this is straight from their pamphlet, national security intelligence and law enforcement, and only that.

Jarrod Bridgeman:
Okay, so that's what it's for, but who... Okay, we're putting our information into some portal, some kind of system. Who at the end of the day has access to this information?

Casey Hiers:
Everybody.

Jarrod Bridgeman:
Everybody.

Casey Hiers:
Except we the people.

Steve Levy:
So this is the official word, it will permit federal, state, local, and tribal officials as well as certain foreign officials who submit through the US Federal Government Agency to obtain this information. So that's the company line.

Casey Hiers:
Steve, this makes me nervous, the whole thing. But the takeaway is ask your CPA or accounting firm specifically regarding beneficial ownership information reporting. Are we on point with that?

Steve Levy:
Yeah, that's really it.

Casey Hiers:
And if there's a hesitation, you need to make sure you get a real clear answer from them because if this is overlooked, this can come back in-

Steve Levy:
In a very large way.

Casey Hiers:
A ridiculous way.

Steve Levy:
Yeah. And it's really not that hard to submit it. It's not a lot of information. They have a website. When we first talked about this, things hadn't been set up yet. That was a discussion in December. Now, things are set up. You get confirmations of filings. You see what is needed for it. It's really not a lot of stuff that you need to submit.

Jarrod Bridgeman:
And a lot of our listeners would probably be in the bucket of you have till the end of the year because they formed the business prior to this year.

Steve Levy:
That's right. And we're getting ramped up for our clients for that filing now and kind of knocking it out for the various LLCs or PCs and things like that.

Casey Hiers:
Well, and unfortunately, I think too many practice owners assume or jump to the conclusion that whoever they've hired is on top of this. And just with basic things that we go over, we notice a lot is missed, unfortunately. And so this is one of those things, again, hopefully it's a non-issue. Your accountant goes, "Yeah, of course," but if there's anything less than that, you probably need to press them a little bit to make sure they're on top of this. And if they're not, that's probably a red flag that that might not be the outfit that your successful practice should be utilizing for your tax preparation.

Jarrod Bridgeman:
Right, right.

Steve Levy:
Yeah, certainly. And I would think we would want to make sure, certainly if in 2025 we're talking to someone, that we want to ask, "Hey, do you have this filing," because if you don't, then it's get it in as fast as possible.

Casey Hiers:
Well, we've talked about shareholder loans, which to me are a huge deal that should be known about and a lot of practice owners don't even know they have those. So this is something that could slip through the cracks that could get real bad, real quick.

Steve Levy:
Yeah, absolutely.

Casey Hiers:
You said tribal leaders?

Steve Levy:
Tribal leaders.

Casey Hiers:
What does that mean?

Steve Levy:
Not exactly sure. Tribal officials, I'm sure they know if they're a tribal official, but I'm not sure what a tribal official is.

Casey Hiers:
Yeah, that's interesting verbiage right there. Anything else on the BOI that we need to know about?

Jarrod Bridgeman:
BOI.

Steve Levy:
Well, it's important, and you don't want to be in jail by not filing. Just get it done fast.

Jarrod Bridgeman:
Yeah. If you're going to go to jail, go for a better reason.

Steve Levy:
Right. Not this. This isn't worth it.

Jarrod Bridgeman:
Something fun.

Casey Hiers:
Make it worth your time.

Jarrod Bridgeman:
Literally. Casey, Steve, thank you so much, guys. Listeners out there, if you want to learn more just about how we are such masters at the business side of dentistry, you can always come to one of our events that we're hosting. We're doing a lot next couple of months in the Midwest. We're going to be in St. Louis and Kansas City next week. After that, we're going to be in the Indianapolis, Indiana area, followed by Ohio, Cincy and Cleveland and all that stuff. Casey, I know you've got some great plans coming up as well for a couple different shows we'll be at. Other than that, please visit fourquadrantsadvisory.com. There is a button that says Events. You can click on that and see where we're going to be, or you can visit the Millionaire Dentist button. I just launched a brand new blog last month. We're going to have a monthly blog kind of blast out on there as well if you want to learn more about how great we are, how great I am, Casey, Steve, all these guys. So thank you so much for being here.

Steve Levy:
Thank you.

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.