Register Your Business and Stay Out of Prison

A year, a new regulation! In this episode, we discuss the new business regulation that business owners must adhere to keep from up to penalized up to $10,000 in penalties and two years in prison for each business owner. The new regulation requires businesses with FinCen.

Learn more details at FinCen.gov.

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Transcript

ANGELA 0:00

For example, our company, there's the two of us, so we could each be fined $500 a day, up to $10,000. So that would be a total of 20,000. Then they could find our company $500 a day. So that's ten more thousand. So that's 30,000. And then each of us could spend two years in prison. 

PHIL 0:18

Yep. 

ANGELA 0:18

Wow. 

INTRO 0:21

This is Life, Love, and Money with Dr. Angela Cay Love the podcast for couples who want to get a handle on their finances and strengthen their marriage at the same time. We take deep dives into the money challenges most married couples face and get real about them. Plus, practical tips on how to ensure a rock-solid future for your money and your marriage. Now, Dr. Angela Cay, love. 

ANGELA 0:51

Hello. I'm your host, Dr. Angela K Love. 

PHIL 0:54

And I'm Phil Love. Welcome to the Life, Love, and Money podcast. I want to thank you all for listening. 

PHIL 1:00

And we have an interesting topic today. 

ANGELA 1:03

We do and we are flipping the tables today. I'm going to be asking you the questions about a new government regulation where you need to report your company. So why don't you start off with telling us about this new regulation? 

PHIL 1:17

Well, this regulatory update is from the Financial Crimes Enforcement Network, which is abbreviated FinCEN, and it started on January 1 of 2024. This was from a law from the Corporate Transparency Act of 2021. FinCEN is part of the U.S. Department of the Treasury, and their goal is to try to make businesses more transparent so they can try to fight against financial crimes like terrorism and money laundering and whatnot. 

ANGELA 1:46

What type of companies need to register with Benson? 

 PHIL 1:50

Well, what you have is any corporation or any LLC or a company that's created by or registered by either state or an Indian tribe may be required to register. Now, the guidelines outline 23 types of companies that do not have to file. some of these would be a publicly traded company, a governmental authority, a bank, credit union, money service industry, securities brokers, insurance companies, accounting firms. If you're tax exempt or if you're an entity that assist a tax exempt entity, a subsidiary of a large operating company. And if you have a business that's inactive, then those type companies would not have to register. other than that, you would. Now, if you have a sole proprietorship, you're not required to file that unless you had to register your sole proprietorship with the Secretary of State. 

ANGELA 2:46

What about a farm? What if you have a like a hobby farm like we have? 

PHIL 2:49

It depends. If you're reporting your income on the farm through your schedule F on your income taxes, then I think no. But if you set it up as a business with an LLC, then yeah, you would have to do the reporting on this. 

ANGELA 3:05

The key is if you've registered your company with your Secretary of State's office in your state. 

PHIL 3:10

Yes. That seems like the main driver for it. 

ANGELA 3:13

Now what about a corporation that's not one of these reporting agencies, like an accounting firm or something like that? What if I have a corporation set up and I'm selling retail on Amazon? 

PHIL 3:24

If your corporation is not publicly traded, then yes, you would have to do the registration with FinCEN. 

ANGELA 3:31

Okay, why did they decide that we have yet another type of reporting that we have to do? 

PHIL 3:36

Well, some would argue it's probably just more busy work for the government, but they say that the real reason is, that they want to make company owners more transparent so that it's easier to spot illegal activities like financing terrorism or money laundering or something like that. They set up laws and regulations that kind of the field that play our business on. This is just another registration you have to do for your business. Like if you sold your products on Amazon, you might have to register for sales tax in your state.

ANGELA 4:08

If I set up my business, I had set it up before the end of 2023, how long do I have to go ahead and register my business if I'm not an exempt business? 

PHIL 4:19

If you were existing before January 1 of 2024, then you need to file by January 1 of 2025. Now if you form a new company on or after January 1, 2024, then this filing needs to be done within 90 days after you receive the actual or public notice that your company's registration is effective. 

ANGELA 4:41

In the state. So, after January 1, let's say it's January 3rd, you went and put your company together. You filed it with the secretary of state in the state that you were in. And once you get your paperwork, which if you do it online, is typically immediately, and once you get your notification that your company has been formed and you have that organizational documents, then you would have 90 days from that point

PHIL 5:06

Exactly. 

ANGELA 5:06

To file. 

PHIL 5:07

Exactly. 

ANGELA 5:08

Is there any fee related to it? 

PHIL 5:10

No, there is no fee related to it. 

ANGELA 5:13

How often does a company need to register? 

PHIL 5:16

The company would only need to reregister if there's a correction, if there is an error in their filing, or if they had a change if they had some sort of change like say they changed their company name or added a trade name or they had a change to the people that were filing the information with a change with one of the owners or ownership change in the company, then they would have to update their filing.  

ANGELA 5:41

Let’s say, if a company decides to no longer be in existence, would they need to go in and update that information? 

PHIL 5:48

That's a real good question, and I didn't explore that. I know that inactive companies don't need to file, but I don't know what happens if you have a company that is active and then they decide to shut down if there's anything new that needs to be done there. 

ANGELA 6:02

Is there any other information that you think is important for our listeners to hear? 

PHIL 6:07

Well, I think it's what is the company going to be filing. What information is the company sharing there? 

ANGELA 6:13

I actually know the answer to that because I filed or I registered our company. 

PHIL 6:18

Okay, 

ANGELA 6:18

So that I would know what that's like. 

PHIL 6:19

So go ahead and talk a little about what information you had to provide. 

ANGELA 6:23

So first of all, you want to go to the website FinCen.gov/boi, so I'll just say that one more time. It's F as in Frank I in is a Nancy Susan cat is an elephant and is a Nancy dot gov slash B as a boy. O, as an octopus. I was an Indiana. I should have picked states for all those letters. 

So, you want to go to that website, it's in the top of the screen, but it's over to the right and it says file. You'll see a blue box that says prepare. And that's where you can click on links such as How do I file? Do I qualify for an exemption? How do I get a FinCEN I.D.? And then right next to that box, which is lighter color, it's almost like a white it says file, and you click on file a report using the BOI. 

I'm not quite sure how they're pronouncing it, but the by e-filing system and I clicked on that to file and that took me to a different website, it's called BOI B-O-I e-filing dot FinCen.gov. And on there when you get to that page, you want to click on file. BOIR in. Once I clicked on there, it took me into a screen where I had three choices. I could file a PDF, and if you file a PDF, you fill out that PDF it lets you upload it, and then you go back in, you scan that and then you submit it. You hit that submit button and then you can submit it that way. 

Then the next choice was to file online and you click on that and then you're just filling in the prompts as that asks you. And then the next choice is system-to-system API, which we didn't have because we're just a really small company. I chose the file online and once I went in there, it asked me the name the state where the company was formed, the company address, the company EIN. 

And so, if you had a sole prop and you decided to not have an E in, you would use your Social Security number and then it has each member I had to put in there. So, we are an LLC with two members and so I had to put them first my information and then I put in your information and that information consisted of my name, the address where we live, my phone number. And then I had to upload a copy of the front of my driver's license. 

So, I had the first put in the driver's license information, which was the state and the driver's license number. And then I had to do yours with your name and your address and your driver's license information, and then taking that picture of the front of your driver's license and putting that in there. And then you have to certify it and sign it, basically certify in saying that all the information is true, then you do an electronic signature and then you hit submit. And it took me all of maybe 7 minutes. 

PHIL 9:16

So, BOI stands for beneficial ownership information. When we talk about BOI or BOIR, BOI is beneficial ownership information reporting. Basically, things that need to be reported is if you have an owner who directly or indirectly exercises substantial control over the reporting company or owns at least 25% of the company, substantial control could be a senior officer or somebody who has the authority to appoint or remove certain officers or the majority of the directors or an important decision maker such as a president or somebody has any other form of control, then that's the information that's being reported

PHIL 9:58

Right. When you fill that out. 

ANGELA 9:59

I wonder how many small business companies or people are going to go out there and say, oh, let me file it for you and charge a fee and that's not necessary. You can do it yourself. I did it super easy. It took me all of, like I said, 7 minutes. And part of that was having you take a picture of your driver's license and texting it to me so that I could then upload that into the program. 

PHIL 10:19

Yeah. If you don't have a driver's license, then I'll take a passport or some sort. 

ANGELA 10:23

Oh.

ANGELA 10:23

That's good to know. 

PHIL 10:24

Some sort of other, ID that has a picture, official ID with a picture, they would do that. 

ANGELA 10:30

Did have a list and I didn't look at that list. I should have paid closer attention. I just had the driver's license. So, I use that. but the point is, you don't want to be scammed into someone saying, oh, let me do it for you. It's really difficult. You want to make sure you do it right, that sort of thing. It was super easy to do. It was basically just gathering state that the company was formed and the address of the company, the owners of the companies address their driver's license. It was super quick and easy. so don't feel like you have to have someone do it for you. 

PHIL 11:01

Now, say you have ownership in multiple companies, so you have your farm and you've got a piece of rental property that's on an LLC. You would have to file for each one. Your choice would be you could either put in the information each time for each company that you have an ownership in, or you could obtain a fence and identify location number. Once you, as an individual, have provided certain information on FinCEN in and then that identification number can be used in place of the information for yourself as the owner. 

ANGELA 11:35

And that was on there when I went in there and said, Do you want to create FinCEN ID? And I chose not to do that. But if I would have done that, there were places where I could click on that ID, I could enter my ID number and it would I think it auto fills and already has the information in there. So that makes that process a whole lot quicker. 

PHIL 11:53

Yeah. So that way you would only be providing the information, the picture of your driver's license, and stuff like that once. 

ANGELA 11:59

Now, where does someone go if they have more questions about FinCEN and the reporting and they have some questions that we didn't answer, where's the best place for them to go to find out more information? 

PHIL 12:11

Where I would go would be www.fincen.gov/boi-faqs. So, www.f i n c e n.gov/boi-faqs. And that's the one that's in the middle, not the underscore. And, there provides a whole bunch of information that they broke down a lot more than what we've said here that you're able to go through and make some decisions on what exactly you need to do. 

ANGELA 12:44

The other thing I like to point out is neither you or I or CPAs, so if you have any questions and you're concerned with how this might affect you or your business, please reach out to your CPA or your tax attorney and talk with them if you have more questions that aren't answered through the website. 

PHIL 13:01

I think you need to know that there is a penalty if you don't file. 

ANGELA 13:06

How much is that penalty? 

PHIL 13:07

If you fail to register, it could result in a civil penalty of $500 a day.

ANGELA 13:12

A day?

PHIL 13:13

A day with a maximum fine of $10,000 and could be up to two years in prison. 

ANGELA 13:19

So, if you have a qualifying company . . .

PHIL 13:22

Hmm, 

ANGELA 13:22

that was formed before December 31st of 2023 and you don't file that company with FinCEN by the end of 2024, you could be fined $500 a day and also serve up to two years in prison? 

PHIL 13:38

Yes. And that fine can apply to both individuals and the company. 

ANGELA 13:41

So, for example, our company, there's the two of us, so we could each be fined $500 a day, up to $10,000. So that would be a total of 20,000. Then they could find our company $500 a day. So that's ten more thousand. So that's 30,000. And then each of us could spend two years in prison. 

PHIL 14:01

Yep. 

ANGELA 14:01

Wow. 

PHIL 14:02

That's how the law reads. because of that, one thing I think you're going to see is if you have any loans for your company with a credit union or a bank, I think there's going to be some questions from your lender or your banker as to exactly if you filed and showing proof that you filed so that they make sure that that registration is at least been done. And if you get into a new business and you have to get say you have to get a loan for your new business, then that's probably going to be a requirement that the lender is going to have to make sure that that is complete in order give you that loan. That way, there's one less thing that the lender has to worry about. 

ANGELA 14:40

So, when I did the filing for our company, I did get a printout at the end of it, which was like a reporting number. And then I was able to actually download the file that showed that I actually did the reporting, and I just saved that as a PDF on our computer. So, if you do go to a lender or bank and they're asking for proof that you filed, you could just give them a copy of that. 

PHIL 15:03

Right? And some banks may do it with deposit accounts too, because, just like you have to provide your information on your tax I.D. number or your the registration of the state you're in and stuff, this may become an important thing that they would want as well to make sure that you're compliant. 

ANGELA 15:19

For your business account?

PHIL 15:20

Your business

ANGELA 15:21

Not your personal account? 

PHIL 15:22

Yeah. 

ANGELA 15:22

Well, those fines are pretty steep. And it seems like it's a pretty serious thing that they want everyone to do. So, it's make sure that if you have a company that you formed before the end of 2023 that you get that reported and you register with FinCEN by the end of 2024. And if you have formed a company after January 1 in 2024, that you get that done within 90 days of when you completed that registration with your Secretary of State's office. 

PHIL 15:51

Yep. 7 minutes of time versus $10,000. That's pretty easy decision. 

ANGELA 15:58

Well, 10,000 for you then. 10,000 for the company and 10,000 for any other owners. 

PHIL 16:02

Yep. 

ANGELA 16:02

Plus, the potential two years in prison. 

PHIL 16:05

Yep. 

PHIL 16:05

Wow. 

PHIL 16:06

It’s not really difficult to do. We’re sitting here in early February, so this is probably something that maybe not a lot of people have heard about, but it's a new law that's just gone into effect. But you've got plenty of time this year. But I'd go ahead and, know, especially when you're working on taxes and stuff like that, it's always a good time to make sure you have all your registrations and everything like that current and up to date and got all that done. 

ANGELA 16:30

Do it now before you forget or put a reminder on your phone or on your calendar for another time. If right now it's not convenient so that you don't forget to do it and just schedule it as an appointment so that you get that done so that you don't end up having any of those fines or any of that, any of those issues. Well, I appreciate you taking the time to research all of that and to read the all the facts and everything that they have on their FinCEN dot gov website. 

PHIL 16:56

Sure. My pleasure. 

PHIL 16:58

Just like Chick-fil-A. 

ANGELA 17:00

I was going to say just like Chick-fil-A. Like I said, I went through and did hours so that I could be able to talk about it and also get that task done for our small business. I hope you don't have any issues. And if you have any further questions, just check out the FinCEN dot gov website or talk to your CPA or tax attorney. 

PHIL 17:17

Well, great. I really appreciate folks listening to the Life, Love, and Money podcast. And, Ang I want you to tell them how they can hear about new episodes. 

ANGELA 17:25

The way that you can hear about new episodes is to subscribe to our Life, Love, and Money podcast. You can also go to my website, angelakayelove.com, that's Angela K A Y E love.com and click on the link at the upper right-hand side of the website and you can see the latest episode there. We post a new episode every Friday. It's 20 to 30 minutes in length, give or take, and we hope to have you join us every week. 

PHIL 17:53

Thanks guys.