What's up guys. It's Clint Coons here. And in this video I want to follow up
on the new Corporate Transparency Act. They finally released
the final regulations. And if you know you've caught my other video,
I talked about the proposed regulations and what that means to you as someone
who owns a limited liability company, corporation or other business entity
about the disclosures. Okay. So if you're not up on this, the Corporate
Transparency Act was passed by Congress to ensure that the government
is collecting information on every business owner
in the United States. It sets up a business entity. Now, the intent of it, as it stated,
is to ensure that financial crimes, money laundering,
things like that are not taking place. And the only way the government
can ensure that that activity is not taking place
or give themselves a leg up to prevent it, is to require you
to disclose information about your entity. And so what does that mean? Well,
this corporate transparency act as an act, it requires that any person who owns
a limited liability company, corporation, any entity
that is registered with what the state with with a tribal organization, must provide to the government
certain information about the individual owners and the people who exercised control over that company. Now, the Corporate Transparency Act,
what does that mean to us as individuals who have set up LLC
for a real estate investing? Maybe you got a corporation,
you're running your business. What's going to be required
that you have to disclose? Well, here's what it comes down to. You have to disclose any beneficial owners
that own at least 25% of the company. Now, when you disclose that, what's
going to be required is that you provide not only the name, date of birth,
physical address, your home address. You're going to have to provide
that as well. You can't use a business address. You're also going to need
to send in a photocopy copy of either your driver's license,
a state issued ID card or a passport. And now none of these can be expired. They have to be current. So this information has to be provided
on any beneficial owner owning more than or 25%
or more of the business. Now, what's tricky here
is that it also takes into consideration the fact that you may own a business
through a business. So let me just give you an idea
of what I'm referring to. So let's assume that you have a limited
liability company set up right here. Some of the things I talk about
in my videos all the time is
that you would set up an LLC for your real estate as follows
And then you have that LLC owned by a Wyoming limited liability
company down here, and you and your wife actually own this LLC, the Wyoming LLC. Now under the Corp KTA, I'll
just refer to it as that under the CTA, of course, both of these entities,
since they're registered with the Secretary of State, must report. So the way you interpret this is that this
entity here is owned 100% by this LLC. However, even though this LLC is the 100% beneficial owner, the true owners
are these individuals down here. So under the CTA for this red box here,
you would provide information on these two individuals
as the indirect owners, meaning that you own this company, which
is essentially owns this company up here. So you would send in your information
for this red box as the beneficial owners. Now for the blue box,
you would have to do the exact same thing. So you would send in the exact
same information for the blue box as well. So again, photocopied
date of birth name and physical address. All right. So not only do
you have to provide information about the beneficial owners, people
owning more than 25%, you also have to provide information on any individual
that exercises substantial control. And so this was a lot of there's a lot of
controversy about that or questions. And and they took Treasury took questions
and comments about the idea of substantial control,
what that meant. And they did clarify it to some extent. And it really boils down to this. Anyone
that is in control of this organization that can decide how the organization is
being run, you have to disclose that information
as well as the beneficial owner. So essentially in my example right
here, you're going to get listed twice. You're going to be listed as the person who exercises
substantial control over this red box. Now, how do you exercise that
substantial control? Well, you control the blue box,
which controls the red box. So they would consider that
as being under your control, which it is. And same with the blue box,
your set up of this LLC. Let's say you're set up as its manager,
then you would have to again disclose yourself is exercising
substantial control. So you see it does get a little
complicated on for most individuals. It's going to be straightforward
though, in the fact that when you look at your entities,
you own control of these things. Therefore
you have to provide your information. Now, if I set this blue box up as follows I own 80% of it and my wife owns 20%. Well, in that case, I wouldn't
have to disclose her information with respect to this red box up here. But if she's listed as a manager of this
LLC, her information would be disclosed as someone who exercises
substantial control over the blue box, which in turn could imply
that her information would need to be listed up here at the red box as a person
exercising substantial control. So when you send in the the annual report,
which I'll get to in a minute, about when that's due,
you would have this owners a red box. You would have this individual control of red box. You would show this. All right.
So she still going to get picked up? She gets picked up under the control side, not necessarily as the owner
because of our structuring. Now, if you think when you when you hear this, when I see that
it's 25% or more, you're going, oh, Clint, I can I don't want to turn my information
over to the federal government. I can avoid that. By the way, I structure my entity. So what you possibly might be thinking,
you're going to set up an LLC as follows and you're going to ensure that you don't
own 25% of this this blue box up here. So you'll create
a number of other types of structures. Maybe you have another LLC here,
possibly create a trust over here, another entity over here, another trust,
and you'll, you'll split up the ownership among all these entities and maybe
you bring in a spouse right here. And so that and then one more
will bring in a kid or a child. We'll say, Hey, I don't own 25%
because this entity owns 20%, this person owns
20, this person owns 20, 20 and 20. Well, even though you might think you're working around
the regulations, it's not going to work for you
because they took this into consideration in the fact that you have indirect
ownership of this blue box through these various entities
that you control or require that you disclose yourself. And in fact, if you did that, the idea
or it may be that individuals who are looking if they did
look at your entity, may wonder,
what is this person trying to hide? Why are they going to such great lengths
to protect their identity? So if you use your children who are minor
children under the age of 18, then you have to submit information
about the guardian of that child or the parent of that child,
what their information would have to be submitted
if if a child was an owner in one of your limited liability
companies, other things that came to mind, what is thinking about this? A lot of people use self-directed IRAs and you set up an LLC
that's owned 100% by your IRA. Well, again, under the same rationale,
because it is your IRA, which is a trust, you were essentially treated as the beneficial owner
for reporting purposes of this LLC. So you would list your name here
as the beneficial owner annual list yourself here as the person
who exercises substantial control. Because in most of these structures, when we you set up LLC
that are held by self-directed IRAs, you're going to be listed as the manager
of that limited liability company. So it doesn't really matter. You know, you can try to get creative and I know
people will throw into the comments. Well, Clint,
what if I do something like this? I set up an LLC and I have a land trust over here and it owns 100% of it. I'm the trustee of the land trust. So then I wouldn't have to report. No, because your Land Trust owns the LLC. You own the land. You're the beneficiary of the land
trust. You will be reporting the the thing to keep in mind, if you set up trusts
or you have general partnerships, these types of structures that I just
described, they're not filed anywhere. So so those structures
do not have to report the only entities that would need to report
they would be a corporation. So if you set up an EA,
that would need to report. So in that case
you will report on the shareholders 25% or more shareholders, and you would report
on the president and potentially vice president of that company. If there's anybody else
that has substantial control, you probably have to disclose
their information as well. Limited liability company
would be something you'd be reporting on if you set up a limited partnership,
a statutory trust. I Wyoming Statutory Trust. Again, I'm listing out entities
that are registered with the state so all of these entities
are going to be required to report so when do you have to start reporting? Well, this was a question
and a lot of people thought that it would begin this year. However, in the final regulations,
the reporting period does not start until 2024. So this is when you begin reporting. So next year,
you don't have to worry about it. So any entity that you've created
prior to 2024, you will have to begin your reporting
on that entity. And again, this is annual every year you're going to have to do this,
you have to begin it in 2024. Now you have one year to report. So essentially you have until 2025 to file this report on your entity. And each year you're required to file
an annual report on that entity. Now, if during the year
there are any changes in substantial control or ownership, you are required
within 30 days to update your reporting. So for example, if I started with a limited liability
company here that was owned by a Wyoming LLC as follows And then I decided
to bring in a joint venture partner on this LLC, and they got a 30% interest that would require that
I update the FinCEN with the new owner or this entity within 30 days
of this person being brought on. So you would have to collect information
from them. You have to collect information. As I stated, you have to get a copy
of their passport, valid driver's license, state issued ID,
you need their physical address and you need their date of birth
and you need their name. So all that would have to be sent in
with regards to this entity. Now, the other thing
you have to be recognize as well is that the person who sets up the entity
that files the entity with the state to get it going, they also have to report
their information. So here at Anderson,
you know, we set up limited liability companies
and corporations for our clients. And so starting in 2024, for every entity
we set up here at Anderson, we have to disclose on that reporting,
the initial reporting for this entity,
the person who does the filing. So if my secretary, Deborah, for instance,
filed a limited liability company for one of my clients
for their real estate, then I would not only provide
my clients information, I have to collect all that from my client
as I just went through. But I also have to provide it
for her as well. After sending a copy of her driver's
license, her date of birth, her physical address and name
and send that in. And again, if she moves, I have to update the the FinCEN as well. So that's going to be required. So if you set up your own entities, not only you have to report
on your beneficial ownership, you also report that you're
the one that set it up. So they so they collect information there. Now, this goes into effect in 2024. So any new entities that are created from January 1st, 2024,
and on those entities that get set up, you're going to have 30 days
to provide that initial report. So existing entities have one year after the law goes into effect in 2024,
but new entities that are created after that period have 30 days
to to make their initial report. And as I stated,
you're going to have to update it now if you're setting up a lot of business
entities or, you know, you already have
existing business entities and you're thinking, you know what,
this is going to be really burdensome. I get it. Who the heck wants to keep sending
in copies of their photo ID and address and everything to
to to FinCEN on an annual basis? Well, there is some relief there. You can apply
for a number, identification number that you would receive this number again, you would send in the required information
that I just described. They will issue you a number. Now, they have not yet finalized
what that's going to look like, the form and how to obtain that number. They will be doing that,
I assume, within the next year. But once you obtain this number,
then you're no longer going to be required to send in all of that information. So say here at Anderson, since we set up
a lot of entities for our clients, we're going to obtain those numbers
for those people who do the filings. I'm also required to have one of the partners at Anderson
send in their information as well. So each of the partners
will have FinCEN numbers so that on an annual basis,
when we're sending in all these reports for our clients,
we won't have to keep getting photocopies from from the partner or for that from
the employee who did all the violence. We'll just provide that FinCEN number
and we'll be good to go. Now, just like the entities,
if anything changes, you are required. If you have been issued a number to submit a updated report
associated with that number. So they have your current
information on file. So I would encourage you if,
you know, starting next year again, I'll put out another video
when they release how to obtain a FinCEN so you can go out there
and get your number if you have existing business entities,
I would highly encourage you to do that to avoid having to go through the hassle
of supplying all of that information on an annual basis
with your report. And, you know,
it really remains to be seen how effective this law is going to be. Just like anything that you know,
the government seems to think that if you pass a law, you're going
to curtail certain types of activity. Well, if that's the case,
I guess we would have no longer any thefts and murders and speeds, speeding
tickets being issued in this country because there's all laws to prevent that
right or criminalize it. But it hasn't stopped it. So I really see this more as an additional
burden that's going to be imposed upon individuals
who are law abiding business owners. And it's a way for the government
to collect the information on you. Now, one question that keeps coming up, who's going to have access
to this information? Well, they went to great lengths
in the preamble to to the final regs to state that the information
is going to be held private. There was questions about whether or not
they needed to collect Social Security numbers because the IRS wanted to have
that information, but they chose it. It was not in the best interest
of the individuals reporting. That's not the intent. Therefore, you're not going to they're not collecting
your social Security number and that information
isn't going to be shared with the IRS. Also, that information is not going to
will only be shared with governmental agencies who are performing
an investigation on a particular business. So I assume they would have to put forth
some reasons as to why they need access to this. Now, again, it's a government database,
and as we know, the Chinese and the Russians
love to hack that information. So will that information
probably make it out on the dark web? Now, that remains to be seen. I would assume, unfortunately, that it will at some point
in time, within the next five years. I wouldn't be shocked to hear some reporting come out that, oh,
the FinCEN database has been hacked and all these business owners
information has been obtained. I mean, the IRS, it happened there. But again, I guess that's just a burden
of doing business in this country now. Anyways,
I hope we got a lot of information out of this about the final regs. We have some time not until next
year, 2024, until we have to do anything. But that is the update. And guys, if you're not yet
a subscriber to my channel, be sure to
to subscribe hit that subscribe button. I wish you all the best
with your investment. Take care.
