Are you ready to submit the BOI for your business before the deadline? Cultivate Works! in collaboration with KJK hosted a webinar on the Corporate Transparency Act, designed specifically for small businesses. This session covers the essentials: identifying entities required to file Beneficial Owner Information with the Financial Crimes Enforcement Network, understanding what information needs to be reported, and clarifying who qualifies as Beneficial Owners and Company Applicants. Participants also receive actionable advice on fulfilling reporting requirements, learn about important compliance deadlines, and explore potential penalties for non-compliance.

Presenter: Samantha Cira/Associate KJK Samantha Cira is a highly skilled associate within KJK’s Corporate & Securities, Private Equity, M&A, and Start-Ups & Capitalization practice groups. She is committed to understanding her clients’ businesses, aiming to provide effective solutions tailored to meet their specific needs and enhance their overall success. Notably, Samantha possesses in-depth knowledge of the complexities of the Corporate Transparency Act and actively works with businesses to ensure compliance. Her commitment to excellence and comprehensive understanding of legal nuances make her an invaluable asset in delivering legal services to our clients.

KJK: https://kjk.com/ 

Samantha Cira: https://kjk.com/professionals/samantha-cira/https://www.linkedin.com/in/samantha-cira-08b47b93/ 

FinCEN Website: https://www.fincen.gov/boi 

The text below is a transcription from the webinar “Navigating the Corporate Transparency Act” with Samanta from KJK and Matt Yerkes from Cultivate. The text may include typographical and transcription errors. To receive legal advice and assistance with your reporting to FinCen please contact KJK.


**Cultivate – Matt Yerkes:** Good morning, everybody. Thank you so much for joining us. I’m sure we’ll have some others hopping on as we get going here over the next few minutes. But today, we’re really excited to have Samantha with us from KJK to do this presentation for us on navigating the Corporate Transparency Act. I know that for those of you that aren’t familiar with Cultivate, we are a small nonprofit that helps aspiring entrepreneurs and small businesses all throughout Ohio. We have workshops every month that we try and address key issues that small businesses are dealing with, and one of the things that we are starting to get questions on is this Corporate Transparency Act more specifically, people wanting to understand what they need to do for this BOI form that Samantha will share some information for us on as well.

So, we’re just really excited to be able to do this presentation, because there are so many questions and uncertainty and confusion around what has to happen here. And actually, also a lot of small businesses don’t even realize that this is something that they need to address. So we are recording this presentation, and we intend to put this on our website when we’re done so people that missed it or want to kind of come back later in the year and work on doing this for their own business will have a quick access refresher for it. And that’s it. I just again, Samantha is here from KJK, and I’ll let her explain all about their firm and what she does. But thank you, Samantha, for joining us and doing this for us today.

**Samantha Cira:** Yeah, thank you, Matt. I appreciate you having me today. When you approached me and my firm about this, I thought it was an absolutely great idea because you hit the nail on the head. There are a lot of small businesses that don’t even realize that this is out there. It’s effective. And it is designed to be something that small businesses need to comply with, and there are consequences for failure to comply. So I’m really glad that you have me here today, and thank you all so much out there that are joining. I really appreciate you taking the time. This is important stuff, and I’m just really glad to be here.

And yeah, as Matt said, I’m from the law firm of Kohrman, Jackson and Krantz. I am a corporate and securities associate. We have a team here of corporate associates, partners. We call ourselves a task force, and we are all about keeping an eye on this Corporate Transparency Act and making sure that our clients and our contacts understand what it is and how it applies to them.

And if you have any questions. Of course, we will have a QA portion to the event at the end of my presentation. Happy to answer them then; otherwise, I also will have my contact information, and you can definitely contact me. Our offices are both in Cleveland and Columbus. I’m down in Columbus quite a bit, though I am in the Cleveland office, so happy to meet with any of you individually or of course, by zoom like we’re doing right now to get a little bit more into some of the nuances. Because, basically, the presentation today is gonna be an overview of what this is.What are the requirements, you know. Does it apply to me? And if it does, what do I do? And you know, when do I have to do it by anyway. So I guess we can go ahead and get started.

Okay, let’s move on to our next slide. Okay? So basically again, this is an overview of what I’ll be covering today in the presentation. Like I said, you know, what is the CTA. Where did it come from? Why is it here? Basically, how to determine if your company, your small business, is a reporting company, and what some of the exemptions you want to keep in mind are, and if you are a reporting company who is a beneficial owner of the company, and also, who is a company applicant. And then, once you determine those things. Okay, what do I have to report for those beneficial owners and company applicants? When do I have to do it? By? How do I do it? What happens if I don’t do it? And what are some of the current legal challenges? I do wanna touch on that because right now there are some legal challenges to this piece of legislation. And so I just kinda wanna make you guys aware of that and what our advice is based on some of those challenges right now and then. Of course, we’ll get to our QA.

What is the CTA?

Okay, so let’s get started on what is the CTA.

The CTA is actually, you know, for me, a lawyer here, a corporate lawyer. This has been a big deal, and it’s been coming for a while. We’ve been looking at this for a while and it actually started back. In 2021 Congress enacted what we call the Corporate Transparency Act, or the CTA, for short as part of the 2021 National Defense Authorization Act.

And with that legislation, Congress tasked an organization called the Financial Crimes Enforcement Network or FinCEN to basically come up with a rule and implement it, and you’ll see throughout. The presentation as Matt even said when he was introducing me. There’s a lot of acronyms here. There’s CTA, FinCEN. Things like that, so I’ll try to make sure that it’s very clear what all of those mean anyway. So yeah. So the Congress said to FinCEN, Hey, you know, we want this corporate transparency rule enacted within the next couple of years. And basically, the reason that they’re doing this is because there’s a lot of bad actors, let’s call them that are utilizing these, you know, businesses to create these shell companies. And they’re exploiting those companies to basically launder money and other types of illegal activity. And so the government is saying, Hey, if we can basically require businesses to tell us who owns them. You know, what is it like? Give that information up, then they’re hoping that that can kind of combat some of that illicit, illicit activity that’s being used for some of these shell companies.

Anyway, so FinCEN went out. They had a rule, they or they came up with a proposed rule. They had a rule-making process and comment, and the final ruling came out on September 29th of 2022, and actually. So it took some time, too. Once the final rule came out to actually have it be implemented. So obviously, a lot has happened. And now here we are. It is finally effective. Starting at the beginning of this year. So it’s kind of been a long time coming. There’s been a lot of different iterations of the rule. But basically, my point is throughout all of this, you know, starting in 2021, when this was talked about until now.

You know, it’s finally here. It hasn’t gone away, and it’s now effective. So again, I’m really glad you guys are here to talk with me about this, because it really has been a long time coming, and unfortunately still, not a lot of people know about it. And as my last point here says, about 30 million existing companies are gonna be required to file a report under the CTA, so that’s that’s a lot of businesses. And I’m gonna guess that most of that those 30 million companies again may not even know that this exists.

Reporting Company

Okay, so here we are. The CTA legislation is finally effective. What do you guys have to do? What do you have to know as small business owners.

First of all, the Corporate Transparency Act, and this reporting obligation only applies. If your company is considered a reporting company.

And of course FinCEN comes out with a definition for what? That is. A lot of this. What a lot of these rulings are all about those defined terms! And you know, do does your business fit within that?

And so a reporting company as here, I have the definition for you guys easy for you to return to at any time. Anyway, it’s a domestic or foreign corporation, Limited Liability Company, or other entity created or registered to do business by the filing of a document with a Secretary of State or similar office under the laws of any State or Indian tribe.

So, for the most part pretty easy definition. If your entity is an LLC. Or as a corporation right there it says it. And if again filing a document with the Secretary of State, if you go on the Ohio Secretary of State’s website. You pay that $99 and you file articles of organization.

You created an entity, your reporting company. There is a little bit of nuances here. Unfortunately, you know. First, some companies were wondering. Well, does that? What if I’m a limited partnership, or you know, some other type of entity that isn’t specifically listed here. But again, there’s that catch all of, or any other entity created by the filing of a document. So yes, it does apply to those other types of typical entities that you would think of like limited partnerships, you know, and so on.

And also, I do wanna make note that it’s domestic or foreign. So if if you happen to own a foreign company or know someone that does if they have a presence here in the United States, or their foreign registered to do business here in the United States. They are also considered a reporting company. If they filed those articles essentially to do business here. As a, you know, foreign qualified entity to.

So anyway, let’s say, we’re all reporting companies here. I’m gonna guess probably are. Most of our clients at the firm are reporting companies. That’s a pretty kind of easy way to check the box like, okay, so this might actually apply to me if it applies to me. Well, are there any ways to be exempt from this? You know. What? Where do I not have to make this filing. And I will say, like, preface this next slide by saying, it’s gonna look a little overwhelming. But I’m just putting all the information out there for you guys, so that you have it and can refer back to it. And if you happen to know anybody who you think might also benefit from some of these exemptions that I’m gonna talk about. Then they’re all there for you. But I won’t touch on too many.

23 Exemptions to Reporting Companies

And like I said, we’re talking about. There’s 23 exemptions to reporting companies. So just because your business was, you know it says LLC. And you filed articles of incorporation. I’m sorry. Articles of organization with the Ohio Secretary of State you might be able to be exempt and not have to report if you fall under one of FinCEN’s 23 exceptions. Obviously 23 is a big number. But I wanna preface that by saying ultimately, while 23 can be a pretty big number, these exemptions are really designed to hit on those businesses that are already subject to these types of requirements in other ways.

So, for instance, I’ll say public utilities, you know pretty clear that those public utilities are going to be required to share information on their owners in other ways, by other agencies and things like that. So I really would say overall that a lot of these exemptions aren’t necessarily going to apply to the everyday small business. And so I just want to make that clear. And I think also, too, you see, 23 exemptions you’re like, oh, my goodness! That is obviously something on my end to keep an eye on, because it’s funny enough. A lot of these exemptions. It’s not a straightforward analysis.

It is very, you know. You only meet this if you read this exemption, if you, you know, hit all these prongs. So anyway, I wanted to include for all of you on this presentation today, all of the exemptions here. But and I’m only gonna touch on just a couple of them solely so that you guys have an idea of what eventually, you know, you could be exempt for a couple of different reasons as a small business owner.

Exemptions to Take Into Account

So the first one I want to talk about. As far as exemptions like, I said, I’m just gonna touch on a couple of them. And it’s really more for that. You guys have an idea of what the most common exemptions that we see from our clients.

And the first one that I’m going to touch on is the large, large operating company exemption.

So right now, most of our clients that are small business owners, you know, might be, you know them and their spouse, or a few employees and family members. You know, we do handle a lot of family businesses at our firm and things like that. So you know, maybe you’re a small business, and you’re just getting started. But you know, maybe your ultimate goal down the line is to get some investors and grow the business and maybe hire some more employees. And really take this thing, you know far, and if that’s the case, you know, depending on how things play out, what could eventually happen is that your business could become exempt from these reporting requirements. If you are a large operating company, and in order to be considered a large operating company and get this exemption, there are 3 pieces that all again. All of them have to be met. A lot of these exemptions like I mentioned previously. You know, there’s a lot of prongs, and all of them have to be met so for the large operating company, if you have an operating presence at a physical office in the US. It has to either be owned or leased property by the company. And again, it can’t be like your residence. You actually have to have, like a physical, you know, business space where you do your work.

Then that’s obviously one prong. If you have 20 or more full-time employees. FinCEN defines full-time employees as employees that average 30 h per week, or 130 h per month.

But I will say, if you happen to, you know, say you have 22 employees, and then you know 2 of those employees or 3 of those employees, leave, then, if you fall below that threshold, your company would no longer be considered an operating company, and a filing to FinCEN would then be triggered.

And then finally, the last piece in order to be considered a large operating company is that you have 5 million dollars in gross receipts, and that has to be reported on your, you know, IRS, tax returns and things like that, and only for money, you know, that’s been collected from sources. Inside the US. Not outside the US. Depending on. You know where you’re doing business. If it is outside of the country that particular revenue wouldn’t count.

I just always want to mention this particular large operating company. Even when we’re dealing with our small business clients, our startups, other entities that are just kind of in the very early stages, this is something that you know one day could apply, and then you obviously would at that time be exempt from having to file these reports.

Anyway. So I’ll just touch on one more, and then we’ll kind of get into the nitty gritty of how to determine what needs to be filed.


like, I said, the only other one that I wanna take into account. Here is the inactive entities. And I say this because a lot of our clients. And perhaps some of you guys out there, too. Maybe you, you know, created an LLC. For you know, XYZ. And Z. Reason, and you know, for whatever reason you you don’t end up doing much with it. Or maybe you do for a while, and it’s kind of something that just sort of, you know, falls by the wayside, and it’s not being actively utilized. To engage in business. And you might think, okay, well, you know, I haven’t used this business. I don’t do anything with it. I don’t. I don’t have employees, I don’t, you know. Bring in money. I don’t even have an office space. I’m just, you know. It’s something again sometimes. Especially with Ohio, which which is nice. Honestly, it’s you know, it’s not too difficult to for to file that initial articles of organization to create your LLC, so you know, you might think I’m gonna spend that $99 and start this LLC. And see where it goes. And then it’s just something that falls by the wayside.

Unfortunately, that FinCEN you know, they always are trying to make things just a little bit more difficult. Just because it. Your entity might be inactive and might not be something that you’re currently utilizing right now. That doesn’t necessarily mean you are off the hook from filing one of these reports with FinCEN. And so basically. And like, I said again, previously, this is a piece here where, if you want to be considered an inactive entity and not make this report, you have to meet all of these pieces of the criteria that is on this slide here.

Again, you know, it has to be in existence on or before January 1, 2020. I think that’s kind of the biggest one that our clients deal with when they think, Hey, I’m inactive. I just don’t use this entity, you know, but they only have created it last year. Well, right here. That does not meet the definition or finance definition of an inactive entity. So we, you know that, and that client would still be required to file a report with FinCEN.

Anyway. So I will say, too. One other thing I’ll specifically focus on that last point there, on my slide about how dissolving an entity does not necessarily make it an inactive entity under the CTA. because, first of all, I will say right away. If we have a particular client that says, Hey, I created this LLC. And I’m not doing it anything with it like. Do I need to report to FinCEN? You know we’ll go through some of these prongs here to see if they, you know, are in an active entity.

And if they are great, and we say, Yep, you know we advise them. Yes, you know you are exempt, and don’t worry about filing, but if not, you know, say they hold some types of some type of assets. There’s been a change in ownership in the preceding year, you know, whatever it might be.

Or even if they have some money in the bank account, things like that. And if they’re not utilizing it, I will say what we always tell our clients to do is go ahead and dissolve that entity again in Ohio. It’s not too complicated to go and start the dissolution process, and it’s a pretty quick it’s a pretty quick way, or I should say the Secretary of State is pretty quick and approving the dissolution. But again, if this is something that you are concerned about, I definitely recommend talking to someone who has kind of become an expert in this area. Whether it’s me or another individual. Just because you know, we’re keeping a close eye on this because it’s tough technically, in Ohio E. Even after you are dissolved, you’re still considered somewhat of an active entity. I believe it’s for at least a year after the dissolution. So there is kind of that nuance there. And that’s again why I like to mention this, because I do think it is something that come into play. And I wanna make sure that everybody here knows that it’s important to understand whether or not you know, if you’re not using the LLC. That you might have decided to form a year ago. You know. What does that mean with this particular set of regulations? And I will, as my last piece before moving on to. You know who is a beneficial owner. Say that.

This is a a reason why there has been some push back here with the CTA, because there is a little bit of you know. Lack of clarity. You know what what happens when we dissolve, you know. Why do we still have to file a report. So that’s why I just kinda wanted to make sure to mention it to you guys.

Who is a Beneficial Owner?

Okay, so enough of that. Let’s go on to the fun stuff right? And talk about who is a beneficial owner. So if you’ve determined that your business is a reporting company, and no exemption applies. Then what FinCEN requires is that you report your company’s beneficial owners.

And of course, since FinCEN loves their defined terms and their definitions so beneficial owner. There’s a 2 prong test. It’s someone who directly or indirectly owns or controls not less than 25% ownership of the reporting company, or directly or indirectly, exercises substantial control.

So I’ll take both of those prongs in turn.

Determining a 25% Ownership

Thankfully what we found so far with some of our small business clients where we’ve helped file these reports for them.

It’s pretty clear to determine, you know, who has that 25% or more ownership interest. Because, you know, let’s say it’s a husband and a wife. It’s an equal 50, 50% ownership interest, you know they both own 50% of the business.

Great. We’re gonna report both of them. So it just gets a little bit more, you know, nitty, gritty down into the weeds. I’ll say if those ownership interests are in a different way, you know, are not necessarily so clear. Like some of the examples that I have here convertible instruments, capital or profit interest.

I I won’t take a lot of time now. On this particular presentation to go over what some of those other interests are. But if anyone has any questions, you know, please feel free to let me know otherwise again, it’s not less than 25%. So as long as you have a 25% or more ownership interest in the company. Then you would be considered a beneficial owner and have to report.

I will say, though, sometimes some of our small business clients or startups they’ll bring in, you know, some sort of minority investor that maybe is only gre getting 10% of an ownership interest. And in that case, you know, they wouldn’t have to apply, or they’re sorry they wouldn’t have to report who they are. But I will caveat that by saying that not only are we dealing with the 25% ownership prong, we’re also dealing with substantial control.

So I’ll start by saying on this next slide.

What is Substantial Control?

Here is, you know, like I mentioned before, say, your small business has a 10% owner great. They don’t meet that 25% threshold. However does that individual that holds that 10% ownership interest? Do they exercise substantial control? Because if that’s the case, then yeah, they would still need to share their information with FinCEN.

So substantial control. I give both the definition and some examples here. Because and I will say, this isn’t an exhaustive list, and FinCEN also has not given us an exhaustive list. I really do think it is a business by business analysis. As to you know who who are the key players in the business, you know it might be the President or the CFO. Maybe it’s the HR. Manager, and she makes you know, the biggest decisions at the firm, obviously hiring. But maybe she does a little bit more than that, depending on you know who wears what hat at the particular business. So that’s why I do wanna mention that. But there is, some good examples here that FinCEN has given us senior officers like I just said President CFO. COO. If your firm, you know, has a general counsel. You know, an in-house lawyer.

All of those individuals would be considered to exercise substantial control. So say you have a CFO. Someone that you’re bringing into your small business to just handle the books, you know. Make sure your taxes are getting filed and all that stuff, but they don’t really do anything else besides that, they don’t have an ownership interest in the company.

Under FinCEN rules here. You would need to disclose the information of your CFO. Because that individual is a senior officer and they’re an important decision maker, for instance, of the reporting company. So again, it is a 2 part test.

You may have individuals that both are a 25% or more.

Or should I say, have more than 25% of an ownership interest in the company, and they also exercise substantial control, or you may only have one or the other, but it is again 2 prongs. It is an or situation, not an and so it is like that could raise the amount of people that you have to disclose to FinCEN. So I do wanna mention that? And there’s a couple of other examples here, individuals having the authority to appoint or remove certain officers or directors if they’re important decision makers like I said before, and if no, of course, gotta love FinCEN, they always have that catch all provision at the end. The individual has another form of substantial control. What is the other form they’re referring to? I don’t know.

But we do err on the side of caution here. At least what we tell our clients. So you know, when we’re talking to them about their business. And they say, Hey, yeah, we have an individual who we brought in to our small business to help us out with XYZ. You know we’ll take a look at kind of their duties to determine whether or not they might be considered to exercise substantial control.

And okay, anyway. So that’s beneficial Owners.

Also, I will say the other piece that I hinted at in the overview section is that you also have to.

You also have to state, or tell FinCEN, who your company applicant is and I will talk about that.

Add our next slide here.

How to Define a Company Applicant

so company applicants and I will start with a note that I have on this particular slide that and thankfully, this is something that FinCEN ended up changing after getting some backlash before the rule went into effect at the beginning of the year.

So basically, if your company has been around which I’m gonna guess most of you on this call, it’s probably the case. So I’m again wanna touch on it in case you happen to, you know, create a new entity, or know anybody else who this would apply to but if your company has been in existence before January first of this year. You do not need to include company applicant information in your filing with FinCEN. There was a lot of backlash because some of these companies, you know, I don’t know how many of you guys out there. Your company’s been around. I don’t know 15-20 years or more.

How would you know, I mean, or how would I know? How would any of us really be able to remember who it was that helped you or you know, if if it was, maybe a secretary or someone like that, helped you file your formation documents and things like that. So I think that that was the biggest push back there. So it’s only for any businesses that were created. Starting this year on January first, where you would have to disclose the company applicant.

So, anyway, what is a company applicant? A company applicant is the individual who directly files the documents that create the reporting company, and I put or registers the reporting company specifically, and to reference the idea that again, foreign entities that are registered to do business in the United States are again required to still potentially make these reports.

Or also the second piece I have on here is is primarily responsible for directing or controlling the filing.

And I want to say this as a way to remind you guys that first of all, everyone here that has to be reported has to be an individual. You know. It can’t be your company name, or anything like that. It’s gotta be individual humans here that are being reported and so the company applicant is, gonna be that person that files makes the filing and is primarily responsible for the filing.

And so I say this because I’m gonna give you an example, obviously using me and our firm here, you know, a lot of our small business clients have said, Hey, can you handle this filing for us? And you know, since we’re just, this is something we’re, you know, rolling out on the daily. So they are directing us and asking us and me as the attorney, to make the filing. And so when I make the filing, I obviously am considered the company applicant, because I’m the one directly filing The information. Well, let, I guess. Let me backtrack for a second when I say directly filing the documents. I guess I should specify that if I, if if our client asks us to create their entity, file their articles, draft their operating agreements you know, or their bylaws get them an ein with the IRS.

Then I would be considered the company applicant, because I’m the one that’s doing that and the client who asked me to do it, or directed me to do it is also the company applicant. So then, when I, when it comes my turn, then, to file this BOI report for my client. I’m listing both them and me as the company applicants here, but it can’t be any more than 2 individuals. So either, if it’s, you know, if I am a small business owner, I have my own business, and I went and created the art. You know, I went on the Secretary of State’s website, and I filed those articles myself.

Then it’s just me. No one else directed me to do it. I did it myself. It’s my company. I’m the company applicant, and that’s it.

Anyway. So again, more definitions, more ands and ors but yes. So if you are forming any sort of new businesses, either at the beginning of this year or onward, definitely note that company applicant piece as well.

Reporting Requirements

So you guys have determined. You know, you’re a reporting company, and you know who your beneficial owners are. You know, you’re a small business, and maybe it’s just, you know, you and a couple of others great. So what do you have to then tell FinCEN in this report? For reporting requirements for the actual company itself.

Pretty straightforward, I’ll say. So say your company is ABC. LLC. You would obviously on the beneficial owner. Information report form. You’ll put ABC. LLC. If do you have any trade names, you know? Am I or Dba? Am I doing business, as you know? you know, Bob Bob Jones. you know, CPA, or something like, let’s say that that’s my Dba.

Then I would obviously need to let FinCEN know that or otherwise. You just say, you know, not applicable. And then the street address at the principal place of business. And again, it has to be an actual, you know, business address and the jurisdiction of formation. So again, if most of you guys are are registered to do business in Ohio, just put Ohio, and then your IRS tax payer identification number, which is for most people gonna be that EIN that I mentioned. Obviously, I’m sure all of you are aware that when you start a business you definitely need to get an EIN number issued from the Internal Revenue service, and that particular number is used to get open a bank account and things like that.

So that’s for, okay, what does your company need to report on your company? And then then we get to. What do you need to report on beneficial owners and company applicants for? And this is applicable to both here. So if you are an entity that is formed this year.

Both of these information, both of the information for your beneficial owners and your company applicants are going to be the same with just a couple caveats. Full legal name. Not so for me, you know, Samantha Marie Sierra, date of birth for me 7, 1593 residential street address. This is very important for beneficial owners, because a lot of them have been like, well, wait a second we don’t want to give out our personal home address here. Can’t we just put, you know the address of our business, you know, wherever that is located? No, you cannot. It has to be your residential street address. But I will say for a company applicant then like for me, for instance, if I’m considered the company applicant for my client because I filed their articles of organization. I could put my law firm’s address for my information. Other than that. It’s gotta be your actual residential street address.

And then I’ll just basically say, these last 2 bullets here are just fancy ways of saying you need to include your driver’s license or passport, and the photograph of either of those documents.

There are a few other documents that are applicable, I’m gonna guess, though, for all of us here, either driver’s license or passport is gonna be something that we all have here. And yeah. So FinCEN on their form has a way to, you know, upload a picture of that document definitely make sure that that document is clear. We’ve had some clients that have given us their passport and things like that. In order to help them with their filings, and they give us this like rainy picture and you know we don’t want FinCEN coming back to us and and being like, Hey, we can’t read the numbers on here, whatever. So yeah, definitely, that’s another big piece here, too, is to make sure that that information is also there.

Okay, so that’s the information that needs to go for beneficial owners and company applicants.

And then, you know, if you. That’s all pretty easy, hopefully, as all of us, as you know, small business owners and for thankfully a fair amount of our clients. It is a pretty straightforward process. You go on FinCEN’s website and put on all the information. And for our beneficial owners, company applicants for the reporting company, and you press. Submit.

Great. So if that’s the case.

Reporting Deadlines

M, one of the biggest points that I wanted to touch on is, you know, what is your guises deadline you here on this call as small business owners. When do you have to do this? By because there are real deadlines here? Again, like I mentioned. I think you know, throughout the presentation the effective date is January one of this year, so it is officially, in effect, FinCEN is actively taking these submissions and so if if you are I think, as I mentioned previously, if you create an entity this year, starting on January first or later, you have, 90 days after you form your company to file your initial report.

It used to be 30, but thankfully, FinCEN change that up to give us and all of you small business owners a little bit more time to get this information together and to make that initial filing.

But I I do. Wanna say, though, if you happen to start a new business next year, then you’ll be back down to 30 days. I will mention that because that is an important distinction. Like, I said, FinCEN and initially just wanted 30 days. But change it to 90 days, understanding that this is a brand new you know, set of reporting requirements, but that will go down to 30 days starting next year.

So, though but the good thing is. And I do. Wanna obviously stress to everybody on the call today that if you are a company that has been around last year year before, you know, whenever, anytime before January one of this year, you have until January one of 2025 to make your initial report so thankfully. It’s an entire year.

But you know, here we are in April, you know. We’re all into the second quarter already, and like, I said at the beginning, like Matt said, a lot of small businesses still don’t know about this, even though. This legislation is actively in effect. So I will say, you know, it’s better to do it. The filing sooner rather than later, especially if it’s something that’s gonna be a little bit of a simpler process.

Might as well get it out of the way, or if you think it might be a little bit more of a complicated analysis, you know, contact your, you know attorney or anyone else who would be an expert on this particular process, so they can start looking into it, because, you know, at least for our clients. Here again. We we have so many small business clients that you know. regardless of the fact that they might have been around for a few years, and they got a little time, you know. We don’t want everybody. And FinCEN doesn’t want everybody filing these things, you know. December thirtieth. And yeah, it would be you know, a stampede to the finish line type of situation. So definitely sooner rather than later. Get that going.

And I will also mention to this is a particularly interesting piece. But say, you make an initial report, or we make one for you.

and oh, goodness! A month from now you change addresses. You know your business moves to a bigger space.

Or say you told us that your birthday, or maybe one of the beneficial owners. Birthdays that you don’t know, you know, by heart. Was a certain date, and it’s actually a different date. So the information initially submitted was wrong.

You only have 30 calendar days after the date you become aware, or have reason to know, that’s those are very lawyer words there? But and again becomes aware, or has reason to know, of the inaccuracy. So if you’re asking me, how would FinCEN? Know that you’ve moved your business.

How would FinCEN know that you might have at, you know, or spelled someone’s street name wrong or something, you know, or who’s monitoring all of this. 24, 7. We don’t know honestly. It’s all. It’s all a little hazy as to how this is being monitored, and, you know, reviewed, but it is something that’s very important to keep in mind, especially if you do utilize a lawyer, whether it’s, you know, my firm or another firm to help out with this stuff, you know, definitely make keep us aware of changes.

you know. Or, yeah, maybe it’s just you. You’re a solo practitioner you are, you know, starting up a business, and then you bring in an investor. You know your very first investor, and that investor has a big chunk in the company, you know. You gotta obviously, then, update that report and let FinCEN know about that new individual that would be considered a beneficial owner.

Potential Penalties

And that gets me to the next point of potential penalties.

This is another piece, and why I think it is so incredibly important that these that small businesses know about this stuff because there are penalties. FinCEN has penalties that they are I don’t know throwing out there. I don’t want to say threatening us with, because I don’t think that’s the point of this. I just think it’s, you know, it’s something that they want businesses to take seriously. They don’t want them to just think, oh, yeah, like, I don’t have to worry about this.

Yeah, yes, you, you know, you small businesses in particular do have to worry about this and if they don’t file in a timely manner. There are civil and criminal policies, and I put them up here on the slide, you know, just as a little bit of a I don’t know, capitalized bold underlined reasoning here that this stuff is important. I don’t know how FinCEN will assess the penalties. I don’t know again, how. How will they necessarily know if you fail to update a report. Or maybe you don’t fail to update it. You’re just a little late in updating it.

It’s unclear now. And I do think that there definitely will be some sort of grace period, as all of this continues to roll out and gets refined. But definitely important to remember that these penalties and understand that this is, you know, a really important a piece of legislation that small businesses really need to adhere to.

So how do I file a report. I’ll just take a quick moment on this. This is a screenshot of the home page that you will see if you decide to file this report by yourself.

very easy to find

certain. If you know. If you just Google search, you know beneficial ownership information reporting FinCEN, it’ll take you to this page, and then

you click on file a BOIR, and then you get started. You’ll see a page. And it’s basically a step by step. Fill in the blank. Check the boxes type of process. You move through the information for the reporting company. Then you move through the information for the beneficial owner and company applicant to the extent it’s applicable, and then at the end you hit, submit, and there you go.

I will say this filing does not cost anything. That is the one thing about this, and that’s what FinCEN says. And it’s funny. When this all came out, FinCEN said something like, you know, this won’t be a big burden for small businesses, because it’s a free filing, and maybe they need a little bit of time to talk to a lawyer and have a lawyer help them file this?

So it really should. Only I think they were like estimated like $87. Per small business, or something that it would cost to do all of this.

but I don’t necessarily agree with that, because, you know, there’s just a lot of nuances to this a lot of pieces of the puzzle. So I think it’s probably gonna turn out to be a little bit more than that. But again that goes back to the whole idea of just the some of the challenges, and I guess that’ll get me over to our next piece here

Legal Challenges

about legal challenges. I just want to take 2 s before we get to the QA to touch on this again. I know so many businesses don’t even know this is real but to the extent that businesses do, and maybe they read the headlines of you know the New York Times, or whatever you want, you know. Choose your legal publication. There has been not surprisingly legal challenges to this piece of legislation. There were legal challenges long before. You know. It even came out lots of pushback lots of comments from people saying, this is an invasion of our privacy.

don’t you? Already? You know the Government already has all of our information, anyway, don’t they? So it’s kind of duplicative. Why are we doing this or

The bad actors that FinCEN is trying to weed out? What makes you think they’re gonna file these reports? You know, the people that are gonna file. These reports are, gonna be small businesses like, you guys on this call that are doing everything right?

yeah. So there’s been some some backlash and it all kind of culminated back. In February in particular, a ruling came out from the Us. District Court in Alabama that ruled the Corporate Transparency Act unconstitutional. It was this big breaking news. It spread everywhere. But the biggest piece to keep in mind, though, is it’s just a District court ruling case. and it only applies to the plaintiffs in that case. So everyone, you know mistakenly thought, oh, the corporate transparency act! It’s gone like. I don’t have to do this.

Unfortunately, our advice to all of our clients, and my advice to you on this call is, yes, you do still need to make these filings. We don’t know what’s gonna happen yet with this District court case, the Government quickly appealed it not surprisingly. And you know, it could go up to the Supreme Court honestly. I do think there is an argument to be made that this is a pretty you know, broad step by Congress.

And yeah. But who knows? It’s too hard to tell. And like I said previously, what I really wanted to emphasize were these penalties.

So you know, there’s these deadlines. There’s these penalties for noncompliance. And I mean, it’s just not worth it to not make the filing when we don’t know where this legislation is. Gonna go. And also I will say, copycat lawsuits, though, are out there, too. We are in our task force here at Kohrman. Jackson and Krantz are following these very closely. Because yes, there are plaintiffs, I’ll say that. See this Alabama case, and they’re like. Oh, my goodness! You know, let’s try in our state. So that, for instance, Michigan, for one there’s a lawsuit out there now. I’m trying to get the Cta ruled is unconstitutional.

But say that it gets appealed, and you know all the way to Supreme Court. Honestly, I don’t think that this is really, ever gonna go away. I think the FinCEN is really harping in on the fact that this is a practice that’s already done in other countries. We’re kind of behind the ball. And if anything, it might be narrowed a little bit.

And also I will say, my last piece on there is State laws. Even if you know the Corporate Transparency Act goes away on a Federal level. A lot of States are implementing their own versions of it New York, for one has llc. Act, they call it, that is going to be effective this year, and Ohio may follow suit or other States may follow suit. So just to say, if you happen to hear or see things about this lawsuit, just know that. Yes, it’s important.

But no, it doesn’t mean that you guys should not file and just ignore all of this. because again, FinCEN is really pushing that this is something that you know we’re behind on. And no, we promise you that we’re keeping all of your information private. It’s only for it’s only gonna be for

You know, law enforcement officials and other things like that. And it’s so easy. And things like that. But yeah, regardless. I’m gonna guess that everybody on this call, you know, this is important stuff. And again, I I thank you all so much for joining before I get to questions, I’m gonna skip just one slide basically say that, if you guys do have a specific questions, or you know, small, some of you guys that are small businesses on here.

What is KJK Advantage?

again. Kohrman, Jackson, and Krantz is located in both Cleveland and Columbus. We do have an office in downtown. Columbus and I know a lot of you on the call are probably from that area. We do have a program. It’s called our Gc. Advantage program where smaller businesses start ups that are just getting started, but maybe need a little bit of extra help from a lawyer to just review employment contracts, review Cta filings. And you know that’s why I’m bringing it up. But you, you know you’re not at a point in the business where you have the need for a lawyer full time, or to bring someone in in house. This particular program is something that we set up to help those businesses to say, Hey, guys, you know, if you need help from someone will be your outside general counsel. It’s a very predictable flat fee program where you can reach out to your attorney 24, 7, and not have to worry about. Oh, I’m picking up the phone. Should I pick up the phone? Should I talk to my lawyer? You know it’s very predictable. And so I just wanted to mention that, too, because, it’s something that we’ve rolled out within the last year or so in our small business and and our startup clients have really appreciated having that as an option for stuff like this, if something like this comes up with the corporate transparency on your act. And you’re like.

I don’t want to like. I don’t know this. Well, you know, or and at the same time you need, you know, someone to take a look at an appointment agreement because you’re bringing on your first employee. You know it’s all covered. So anyway, if you guys have any more questions about our Gc advantage program, 2 of our lovely Columbus partner and Columbus associate there on the screen. So yeah, we’re both split in between the Cleveland and Columbus offices. It’s a wonderful program. And so I just wanted to mention that if anyone has any questions on it definitely, please

feel free to reach out. You know, I’m so happy to be here today with you guys, because, you know, we can talk about this stuff and I can just hopefully be a resource for you all as you continue on your small business journey.

With that, I’ll say, open up to questions. Looks like we have about 10 min.

And, Matt, I think you were. Gonna get back on to kind of lead. Some of the questions here.


Yeah. So I can see that someone Jeff has already asked

Oh yes!

What’s what wholly own? What about wholly owned subsidiaries? Do both sub and parent register, or only the parents.

That is a great point. Thank you so much for that question. I did debate whether or not to put that in that in the slides here today because, I will say some of our even small business clients. Yes, they are maybe wholly owned by a bigger company. So what does that mean to them as the subsidiary? I will say, if you, as say, your company is the subsidiary is wholly owned by a company above them that is exempt almost all of the time. You, as well as a subsidiary, would also be exempt.

But with a caveat FinCEN, because they’re FinCEN I can, obviously, and I’ll I’ll share this to after FinCEN has a great and one thing I will applaud them for a great what they call a small entity compliance, guide, easy to find. Search it. I definitely will share the link. There, that goes through all of this and into a deeper dive on all of those exemptions, to the exemption that I’m mentioning is the subsidiary exemption where there are.

I would say, probably about a dozen of the 23 overall exemptions, where, if your company is wholly owned by a company that fits within one of those 12 exemptions, then you also do not have to file. But there are a few exemptions where, just because your wholly own, or your the parent company that wholly owns you as a subsidiary is exempt doesn’t always like.

If it’s a certain exemption that’s not within FinCEN’s list, then you would not be considered exempt as well. So either you as a subsidiary, would have to find another exemption that applies to you, or you would have to disclose.

So I think again, it just goes to show just the little nuances. Just when you get a question answered from FinCEN, we get more questions over and over. But I will say I’ll use the example that I used in the in the presentation, because it has applied to a lot of our clients.

Specifically, the large operating company exemption. We have. And I’ll say, you know, for instance, some of our parent companies have formed new subsidiaries this year. Oh, no! 90 days to make that initial filing. So thankfully, though, at least in some of the cases. Not always. This subsidiary has been wholly owned by one parent, and that one parent is considered a large operating company.

They that parent has 20 or more employees, they have 20 million in revenue whatever they’re in the United States. So in that case subsidiary does not have to worry about anything. And I will also say, too, I I don’t. I don’t believe I mentioned this earlier. If you are exempt. you do not have to make any filing. You don’t have to tell FinCEN on anything which again, it’s like, well, how would FinCEN know that if I forgot to file that I or you know that it wasn’t because I was exempt, or whatever.

but yes, you don’t have to make any filing or make any indication to FinCEN that you are exempt, either. So, but if, of course, things change, you’re a wholly owned subsidiary, and your parent company.

I don’t know.

loses 10 employees, and is no longer considered a large operating company. That exemption goes away. It goes away for them, and it goes away for you as a subsidiary.

Is that basically, I think the whole question. There was there another piece to it, Matt.

I think you got that one? The the next question, is this a one time filing, or do we have to do it annually?

Thankfully. It is a one time filing. Yes, as long as there are no changes, though, or corrections. So if you are a small business owner.

You have a 30 year lease of your business location and you don’t move your residential address, you don’t, you know. and nothing changes. Essentially, then,

yeah, you’re done. You’re all good. But yeah, I think what’s really unfortunately gonna get people, or, you know, hopefully, not is the chance is the goal that yes, if things change, if the information that you put it that information that you submitted to FinCEN changes, then yes, you do have to update FinCEN, and that’s not necessarily annually, though that’s again within 30 days of that change.

So that’s the only thing I like to say, but hopefully, it’s a one time thing, and you never have to think about it again. But definitely, when you’re doing the filing at the end, it gives you the option, you know, to save your answers. Print them, do it. Keep it somewhere.

Just make sure that you like. Oh, yeah, what did I say on this again, okay, no, I’m good. I don’t have to update it.

So yeah, hopefully cross our fingers. All of us here on this call is small business owners or something that’s just a one and done so. We just have the headache now. And then you’re done.

I I could see it being kind of tricky to remember that. Oh, I changed my! I move my house and then oh, I have to update my Boi like that is something that. Wouldn’t necessarily be thinking about that.

Yes, and I think it for us. You know. We’re so happy to help our clients with all of this. You know it’s what we’re here for. Our clients are expecting it from us. But we are really honing in that guys. You know, how am I gonna know if you move. So yeah, if someone else helps you out. And finally, these reports definitely, you know, make sure to keep them apprised of updates.

This next question. I had the same exact question. We work with a lot of businesses where they don’t have like a business address. There. Their house. Their residence is their business address, where maybe they have a mailbox with like a ups store, or at a Co. Working space. What? What do those people do? And if their home address is their business address, or it’s one of these other types of mailboxes.

Yeah. So if that’s the case, obviously, you know, no matter what it does have to be physical address. And so I say, things like the Po box says

it’s not clear. And that’s a funny. You ask that, though, because I we have clients like that who are like, well, we just wanna receive business mail somewhere that’s not in our own house, but we do our business at our house. That is where the business takes place. So we’ve been saying, use your residential address because it is your business address. I would take that over putting something like a Po box, because I do think that also, like.

you know, might attract FinCEN’s eyes or something. Because I think the point is, I don’t know who the heck is, gonna be the ones that FinCEN monitoring this, I mean, aren’t all of us here looking for employees? Time, like, you know, who are they going to task at FinCEN to be able to handle all of this, you know, like I said at the beginning, 30 million or more. And I think that’s a low balling it. I think. Obviously, there’s so many small business owners out there. I think the 30 million is probably 30 million that actually know this even exists.

I think it’s a lot more than that. So yeah, how I I you know. But I I wouldn’t. I don’t want any of my clients or any of you guys here on this call to attract any eyes? So I would just say, but yeah, I mean, if that’s where you’re doing your work. Then I you know. Yes, it’s definitely just gotta be. It’s your principal place of business, that is, basically, you know what the thing to keep in mind. Where do you do your business every day.

Okay. One other question that I have, and there’s still time for more questions. If anyone wants to throw any in the QA feature. But one question I have. I’m kind of always paranoid about scams, and I know that even when a small business is going to set up their EIN you Google, that there’s, you know, half a dozen websites that are happy to charge you to set up your EIN, are you? Are you starting to see? Or do you expect to see. like any scams related to this, or like phishing emails or people offering, you know, to you know, to do this for you for a fee that wouldn’t necessarily be like that an attorney or even even sending you like emails saying that you are, have a fine, and you should pay this, you know. Pay for them, for you’re fine for not filing this.

Yes, 100. Thank you. Matt, for hitting on that, because that is a I would say it’s slowly, like we’re seeing it, but not a lot. But I’m our our thoughts. And it’s funny cause I was at a round table group of different practitioners that are all you know, are all kind of working through this and bouncing ideas of how you know. XYZ people are handling it. That is a big tat. That was a big topic. We think that as this rolls out, as more people find out about it, especially maybe once we hit that one year, deadline. And all of a sudden, you know, the deadline comes up for currently registered entities before January one of this year. That we’re gonna start to see a lot more of that. There are. Gonna be those scams. You’re gonna get emails. You’re gonna get you know, thing, letter notices in the mail that have big, bold letters of you know you’re in breach, you know. You’re- pay us a thousand dollars, or or we’re coming after your business and shutting you down. I think that’s gonna be a big deal, I think, no matter what, though FinCEN has said, at least the very you know, minimum that they’ve said has been they will never contact you like that. If you get anything like that, it’s spam. It is someone to try to take advantage of you guys as small business owners who don’t know anything about this

But that’s why I’m glad you guys are here, because you know about this? You know I I am. I’m concerned about those small businesses that are just like I don’t know what this is. And just, you know.

Look at it and like, Oh, my gosh! I’m scared! Or oh, yes, this person’s only charging me $10 to help me. Okay, and cause this stuff is very sensitive information. We do recognize that. So here at our firm when we have our clients, give us this information. We we created this extra secure, like, you know, fill in the blank form in or cause. You know, we even recognize that even though we’re their lawyers like, you know, this is the driver’s license, their passports. They’re, you know, that’s like some really sensitive information. So you don’t want to just be giving that to anybody.

And I will say to one piece, sometime we’ve had accountants. Ask us, if your small business has an accountant that helps you guys out. I’ve seen that accountants are they’re kind of of the opinion that doing this is considered the unauthorized practice of law. So a lot of them won’t do it. So they’re kind of pushing their clients over to their lawyers to do it and things like that. So like, I said, this is why our clients are, you know, like, we want you to do this and numb so that’s why we’re like, okay, we gotta get on board here. And we’re gonna learn all this thing. And we’re gonna become the experts so that no one else has to, because it’s a lot, and it’s changing all the time. So we’re keeping up on that. But yes, definitely. Keep an eye on that stuff, please. The FinCEN’s, not gonna get. Get to you guys like that. They’re not gonna do that stuff. No. So I mean, if that changes, you know, stay tuned, as far as you know. If it comes out a year or 2 later and then sounds like, Okay, no one’s doing this. We gotta buckle down here.

You know we’ll keep an eye on that stuff. But for right now definitely something to keep in mind. I I’m sure many people will take advantage of this and try to make a quick buck and steal your personal information.

Great great. And I think that kinda hits on the last question someone asked like, How should would we expect them to contact us? Doesn’t sound like

FinCEN is gonna contact us at this point. That’s not part of the the playbook. It it’s us filing with them. But if that changed. There’d probably be some public information, and I shared about that that we would know that’s happening.

Yes, I will say right now, and we’re monitoring this closely, because, of course, we’ve been doing these filings for our clients, and we’re like.

you know. And of course, the it requires a piece of in you have to like, give an email address just to then, you know, once the filing is submitted, you get like a hey? Your filing has been submitted congrats. Here’s a copy, you know. so we’ve been thinking since they have that email address. are they? Gonna then send something like, Hey, it’s been approved, or, Hey, we’ve looked at it and verified everything. No, haven’t gotten anything like that. So 0 communication, we just file it and get a hey? Your filing has been complete. Save this for your records. Not to say that that won’t happen. I’m like you were hinting at Matt. I wouldn’t be surprised at some point. I don’t know how the heck they’re gonna do it. It’s just

I mean, we didn’t even know what this database was gonna look like until it came out January one. So I can’t imagine but yeah, I would say, so far, it’s really been a process of just submitting this. And again, maybe down somewhere down the line. But yes, definitely a good point, because if you do get comfort or stuff from Fin like now saying, Hey, you didn’t do this. You’re getting this $1,000 fine. Chances are it’s it’s a scam.


Well, great Samantha, I think you maybe have one slide that has, like your contact information. Wanna pop that up there before we before we wrap this up

just want to know when.

Oh, this is one that. Oh, my goodness, my! You know marketing helped Matt and I put these together so they and I like didn’t even realize it was my whole face. But yes, it does. Please feel free to reach out to me, even if you just have a basic question. You know, I’m here for you guys. If you couldn’t, or if you can’t even think of questions because you’re like, Whoa, what is all this. And you think of it later. I’m definitely available by email. But also phone number 2,

check out my linkedin and also here, I do have some resources for you guys to visit our law firm’s website is Kjk.com. And there we have a resources page

we. We print a newsletter every week feel free to get on our web mailing list, because a lot of it is my myself and my colleagues corporate transparency act updates and things like that. So we really wanna make sure our clients and just our connections in general, like, you guys on this call, understand what’s going on. And if there’s changes that you can. Rest assured that we’re following that information.

In those changes. And you know, we’re here to update you guys and answer your questions. And you know, if you need. If you think your business might be a little bit more complicated and need a little bit more of an analysis. Again, we got a great team here, and our paralegals, the one that makes the filing. She’s wonderful. And yeah, like. And even, we’re both in Cleveland and Columbus. Definitely, a very strong mid sized Ohio firm. Yeah. And you know, we are full service here, but you know my my love is corporate space in this particular. piece of legislation is just such a big part for us right now. So we’re doing everything we can to learn it and to make sure that we help our clients to the best of our abilities. So and thank you so much. I really appreciate the time, Matt, you’re going to circulate the slides hopefully, or then, or at least the presentation will be available on cultivates website is that.

Yeah, so what what we’ll do takes us a week or 2 to get this together. But we’ll take the video of this and put it on our website. And we’ll we’ll email everybody that registered for the event. We’ll send you a link to to to reference this the video of this presentation. So you could go back through or share that with a colleague as well.

Yeah, please, yeah, share it with anyone that couldn’t attend today. Definitely, you know, feel free to share with them. Or again, like Matt said. The presentation will be available. But if you’d like to sleep, my my slide deck definitely reach out. I’m happy to share it, and definitely happy to get get together and answer any other questions. And just thank you all so much for your time. Like, I said at the beginning, this is such important stuff. And I really appreciate you guys, taking the time to learn about it, and yeah, thank you

Alright. Thank you very much for joining everyone.

Everybody have a great rest of your Tuesday.

Bye, bye.