Adam Larson: 00:04

Welcome to another episode of Count Me In. I'm your host, Adam Larson. And today, I'm thrilled to have Frank Tumiello, CEO of FileForms, join me to discuss the Corporate Transparency Act and its impact on businesses across the United States. With millions of companies required to file the beneficial ownership information reports by the end of the year, Frank and I will explore the lack of awareness surrounding this new federal compliance requirement and the potential consequences for noncompliance. Throughout our conversation, we'll cover the various filing options available, the details required in the BOI report, exemptions that may apply, and the responsibilities of beneficial owners in ensuring compliance.

Adam Larson: 00:43

Whether you're a business owner or simply interested in staying informed about the corporate compliance, this episode is for you. Should join us as we learn more about the Corporate Transparency Act. Well, Frank, I'm really excited to have you on the count me in podcast today. And today, we're gonna be talking a lot about the corporate transparency act. And you know, as the CEO of file forms, you know a lot about this.

Adam Larson: 01:09

And as we were talk chatting before this, before this podcast, you know, you guys mentioned that there's 32,000,000 companies that still need to file reports. And that's a huge number. Is that an expected number? And and why is it so large? Yeah.

Frank Tumminello: 01:22

It it is a huge, a huge number, Adam. We're expecting, quite a bit of, BOI reports to be filed by by the end of the year. You know, we we we actually unpacked how FinCEN, who, who's the government agency regulating this new beneficial ownership information reporting requirement. We unpacked specifically how they came up with that 32,600,000, reporting company number, and we actually believe that number to be drastically understated, largely due to the methodology that they used in calculating, kind of an entity per capita across states. They used kind of an average across 10 states and and and, was able to kinda derive a ratio to to kinda estimate what the the reporting population would look like nationwide.

Frank Tumminello: 02:11

So, we actually think the the the real number is probably close to 40,000,000 businesses. And it's pretty remarkable because that number is going to continue to grow, any given year, especially since the pandemic where you see a lot of freelancers and side hustlers hustlers and, you know, folks becoming more and more entrepreneurial as they either unfortunately got laid off from their corporate jobs or maybe maybe just got fed up with it because of, you know, working remotely or need to go back into the office. We're seeing more and more legal entities formed any given year up to 400 to 500,000 per month. So, effectively, those businesses are largely all gonna be reporting companies. So not only is there a huge need to file initially a BOI report for all preexisting entities, but every month, there's going to be, you know, a a few 100000, new businesses form that also need to file, which will add to that number.

Adam Larson: 03:03

Yeah. It will continue to grow. Now do you think there's a big lack of awareness that they even need to file? Is there is there and is there a gap between those who need to file and those who are actually aware that they need to file too?

Frank Tumminello: 03:14

Certainly, a huge gap of awareness. You know, I think an interesting stat is just the number of BOI reports that have been filed year to date so far. So here we are in late June, effectively 50% of the of the year has gone by, yet only about 2,000,000 BOI reports have been filed to date. So that's less than 5% of, you know, the 32,600,000 that are expected or even the 40,000,000 that we expect. So I believe the reason for that is because of lack of awareness.

Frank Tumminello: 03:47

And the reason why I think that is the case is because our team is speaking with, CPAs, law firms, directly with small businesses, family offices, real estate investment companies, and we are laying down the initial knowledge base for these folks who have quite a bit of filing on their hands in the next 6 months. So it's it's certainly a need for folks to become more aware of this law. And I think one of the the primary reasons why people, aren't aware of it is largely because of inertia. And what do I mean by that? It's it's because this is new.

Frank Tumminello: 04:19

They've never had to do this before to run their business. They're not looking for, new federal compliance requirements. There's just not that many of them outside of, call it, filing your your taxes with the IRS. So, obviously, everyone knows the IRS. We've we've had to report to the IRS as business owners for for many, many years and as individuals.

Frank Tumminello: 04:40

However, FinCEN, which is the Financial Crimes Enforcement Network, once again, that that, agency of the US Treasury who's now regulating, the BOI reporting, across our nation. They're just not a well known agency whatsoever. Businesses have never even heard of FinCEN. They think it's only for financial institutions or or real estate companies that need to report. So if you look at FinCEN across all of their social media platforms, they only have 18,000 total file followers.

Frank Tumminello: 05:09

So compare that number to the 40,000,000 businesses that need to file. It's a starking, Lee, you know, big gap that, you know, I think, you know, all their efforts are are great to to educate, but at the same time, it's just, not not broad broadly enough spread, unfortunately.

Adam Larson: 05:25

Alright. So let's say you're listening to this podcast and you realize, oh, no. I need to report. You know, what are your options? You know, how do you choose the best approach for your organization?

Frank Tumminello: 05:35

Yeah. I think, the the first step is just looking yourself in the mirror really and and determining, are you the type of business owner that's a do it yourselfer, or are you the type of business owner that's really looking to, you know, spend every minute of your time in the most efficient way possible? You know, obviously, you know, depending on the size of your business, your set of responsibilities could vary quite significantly, so can your support staff. So, if you are kind of a a younger business running, you know, a little bit more lean, then perhaps you might want to attempt to file your BOI report on your own and and save a few dollars. You know, there there is a an ability to do that directly on the government portal.

Frank Tumminello: 06:16

FinCEN has a website that you can go on to and file for free. Though I will say, if you choose to go that that route, there are a few considerations that you should take into account. And, primarily is the fact that, this is a new complex reporting requirement. FinCEN is not providing you really a a a guided tour of how to file this BOI report in real time. They're basically providing you, 95 pages plus of government jargon that you'll have to read over and determine your reporting obligations effectively on your own, and then a a very static, PDF looking portal, for you to to simply disclose your information, which is somewhat of an error prone process given the nature of the data that needs to be collected.

Frank Tumminello: 07:00

This is very sensitive information. We're talking about government IDs, pictures of the ID, Social Security numbers, EINs in some instances. So, not exactly the type of information you wanna be sending over email or text message. Unfortunately, FinCEN, you know, is is really kind of putting that onus completely on the beneficial owners who need to aggregate this information, and not giving a ton of support if questions do arise. So, one of the other alternatives to filing a BOI report is working with companies like us, file forms.

Frank Tumminello: 07:31

You know, file forms is able to take the FinCEN process, which takes, you know, 2 to 3 hours per entity in many cases down to, about a 10 minute filing experience. So there's a huge time saving if you are one of those business owners that's like, you know what? I just wanna do this right. The liability is too great. You know?

Frank Tumminello: 07:49

If you mess this up, this is a $10,000 fine per legal entity. So many of times, people have several legal entities kind of making up their corporate structure. That $10,000 fine is gonna, you know, apply to all those legal entities if, for example, you you don't disclose a beneficial owner correctly or you misrepresent the company information in some way. So having a a partner in filing, such as file forms that, you know, 1 saves you, you know, hours of time, and 2 can prevent a ton of liability just for a few $100 in filing. Many folks believe that to be a no brainer.

Frank Tumminello: 08:22

And then furthermore, if you are a CPA or an attorney who has a variety of different clients and a whole, perhaps, portfolio of clients that need to need to file these BOI reports by the end of the year, you're gonna want kind of a central repository where you can store all that information because changes will happen. And, the nature of this law is very unique in that this is not an annual filing. This is not a filing that's done kind of scheduled annually throughout the year. This is a perpetual monitoring of the data type of disclosure. So, what do I mean by that?

Frank Tumminello: 08:56

I mean, you disclose your information once. And if anything on your form information wise changes, throughout the year, such as an address or someone gets married and their name changes or a c suite executive turns over, gets hired. Any of those things that happen all of the time for businesses, those changes will need to be disclosed within 30 days of the change happening, which is a pretty tight window in the realm of tax disclosure or other types of federal or state information disclosure. So to have a a technology solution once again that can automate some of the reminders and monitoring and the storage specifically of that data and also the aggregating of that data. You know, being able to disclose IDs securely directly to our platform rather than, you know, potentially compromising them via email or or text message.

Frank Tumminello: 09:45

Those are some of the features that we provide, for for a marginally, more expensive cost than free, but at the same time, we believe it to be a very clear value proposition and a and a very fair value for, you know, the risk that we mitigate with our technology.

Adam Larson: 10:01

Now sometimes when people see hear something like a corporate transparency act, they're like, well, I'm not a public company. This doesn't apply to me. But it sounds like that that's not the case here.

Frank Tumminello: 10:10

That's right. So public companies do not have to file a BOI report. And why is that? Well, the government already knows who owns, public companies because it's public. These companies are traded on on large stock exchanges, and and that information is disclosed in real time.

Frank Tumminello: 10:26

The premise of this law is really to to gain insights into who owns all these anonymous shell companies throughout our nation, that ultimately have been formed, in a very, kind of hard to identify way, you know, who the beneficial owners ultimately are. Many states don't require managers or members of of legal entities to be disclosed at the point of formation, and that, unfortunately, has led the US to be, slowly becoming a safe haven for, shielding assets, hiding assets for tax purposes, money laundering in many instances. Folks are now using these shell companies nefariously to hide those transactions, hide those assets. And the US, I think, has reached its tipping point because, unfortunately, money laundering is a multi $1,000,000,000,000 a year issue for the US economy. It's a huge drag on our GDP.

Frank Tumminello: 11:21

And, you know, since the many of the g seven, countries throughout the world have actually, implemented this BOI reporting standard, The US is actually one of the late movers. So now, finally, the US is elevating their reporting standards and and hopefully can help prevent some of that money laundering.

Adam Larson: 11:38

Wow. I mean, it it's it's one of those things you hear about in movies a lot, but it is something that really happens.

Frank Tumminello: 11:44

And Certainly.

Adam Larson: 11:45

I hope that maybe this this reporting standard will actually kind of root out some of the those money laundering things. But I guess until the until the time has passed, you how long will it take do you think we'll actually see some turnover in that?

Frank Tumminello: 12:00

Yeah. You know, it's it's difficult to say. I think, you know, the government has been you know, we interface with Vincen weekly at this point practically and ask them a whole bunch of questions. And, you know, one of the questions we wanna ask on behalf of our clients is when when when do these fines really kick in? I mean, they're they're they're huge fines.

Frank Tumminello: 12:17

They're they're certainly weighing on the folks that are that are aware.

Frank Tumminello: 12:17

But, the government's been, you know, kind of taking the high road, which is, you know, we're just focused on kind of purveying this database of of all the the beneficial owners and their affiliated, reporting companies. And and once we have kind of, you know, the lion's share of the database built, perhaps then they'll start kind of making examples of of folks who did or did not file, correctly. So, you know, it's tough to say from a timing standpoint, but I think initially, there's just an imminent need to to kinda get the initial disclosure, get it all into a database, and then ultimately the government's gonna store that database privately. Certain, government agencies will have access to it. Certain select financial institutions will have access to it for diligence purposes.

Frank Tumminello: 13:04

And that's how they're gonna try to help prevent that money laundering is is having a database and and probably a blacklist across reference against it to to kinda make examples of, you know, who's who's not getting compliant.

Adam Larson: 13:16

Now you've mentioned a few times, like, IDs and stuff like that. What what are the details that are included in report? Because it seems like it's pretty intimate information that they want about the companies and the and the officers.

Frank Tumminello: 13:28

Yeah. It's pretty complex information, especially, you know, if there are many beneficial owners. There's no limit to how many beneficial owners, there can be. So, you know, many many businesses might find they have 10, 20 beneficial owners, if not more. So, you know, if there are kind of more folks around around the table, if you will, the the complexity does does get elevated.

Frank Tumminello: 13:50

Furthermore, you know, legal structures tend to be fairly complicated. You know, sometimes there's multi tiers of, you know, LLCs and and holdcos and and different blockers and kind of the private equity world, for example. So really unpacking the corporate structure is another component of it. But, effectively, you know, businesses will will will, you know, have to disclose their their company legal name, their their DBA, or doing business as name or trade name, if you will, their address, their jurisdiction of formation, and then ultimately their EIN or their, you know, unique tax identifier. And then the beneficial owners will have to disclose their legal names, their date of birth, their residential address, their unique number on their government issued ID, and then also an actual image of the government issued ID, which includes a driver's license or passport.

Frank Tumminello: 14:38

So they're certainly, kind of taking the the the most critical data, if you will, from from those individuals to assure that they have a good sense of who they are, where they where they spend their time, and and, ultimately, which reporting companies they're affiliated with.

Adam Larson: 14:55

Now that just that sounds like a lot of information placed in a government database, and it just how safe is this is this database gonna be? And I I don't you may not have the answers to that, but it just it seems kind of risky to put all that information in one place.

Frank Tumminello: 15:10

Yeah. You know, certainly, we hope that the government is taking all the necessary, security protocols, to ensure that this data, once it's collected, is is stored securely. But I just wanna kinda double back to the statement I made before when I was describing how to file. I would not say that the government has taken every precaution towards the actual, security of aggregating the data. Because once again, their system does not send links, to the beneficial owners to securely upload information.

Frank Tumminello: 15:45

They do not allow you to store the information, securely so that you can kind of only have to make a single update, for example, as opposed to have to fill out the form all again. So, you know, when there are changes, the the folks who choose to go the free route with the government portal, they're gonna have to start from a blank form again. And, really, they're gonna have to store that information somewhere on their own hard drive or USB or floppy disk if people still use those. But, nonetheless, you know, having having kind of an encrypted database, that can aggregate the information securely, and, you know, have a secure back end, that that's what our technology is. And once again, I hope at least on the back end side of things, the government is taking all the necessary protocols, but I wouldn't say the updates from have gone into very many details on exactly how they're approaching that.

Adam Larson: 16:39

Mhmm. I mean, floppy disk might be the most secure thing nowadays because you can't hack a floppy disk unless you have it.

Frank Tumminello: 16:46

Good point. That's a good point. Just gotta figure out how to get them in our laptops these days. They've gotten so tiny.

Adam Larson: 16:51

That is very true. That is very true. Now who in the company is is responsible for making sure that this report is filed? Because it's a company level obligation, but who who in the organization should be responsible for that?

Frank Tumminello: 17:03

You know, the the the obligation really falls, you know, to the company and then kinda through the company to the beneficial owners. So, ultimately, the beneficial owners are the ones responsible for for directing the filing. You know, the beneficial owners are the one who, know, for example, could could kind of authorize someone like file forms to do the work for them or authorize a CPA or an attorney to do it. I will say spending, you know, attorney level rates on on doing this type of work is is a little bit, I'd say, aggressive and unnecessary. You wouldn't have your attorney pay, you know, your cable bill, for example.

Frank Tumminello: 17:38

So, you know, you probably could, you know, find a a service provider that's slightly more reasonable rate to get this done just as eloquently, if not more so, because this is what we do every single day. But, you know, generally speaking, you know, I think folks will will take a variety of different approaches to to kind of filing and, you know, hopefully do it in the most secure way.

Adam Larson: 18:02

So are there any exemptions? Because many times when these government mandated requirements come out, there are exemptions. Or in the case of the corporate transparency, are there exemptions?

Frank Tumminello: 18:12

There are 23 extremely specific exemptions. We actually already covered a couple of them such as if you're a publicly traded company, you would not have to disclose. There's another, exemption that I think is is pretty prevalent, to be considered at least, which is the large company exemption that actually has, 3 parameters that need to be met. The company has to have at least 5,000,000 or more of revenue on a previous tax return. It also has to have 20 or more full time employees working at the business.

Frank Tumminello: 18:45

And furthermore, the third parameter would be having a physical operating presence in the United States. So if all 3 are met, then the company is deemed a large operating company and the government feels that they have enough, understanding of who owns that business given the size of the business to not have to, collect the BOI report. But a few other exemptions are, you know, inclusive of, you know, banks and other regulated entities. Those businesses already disclosing with other, you know, other government agencies such as the FDIC, for example, you know, certain private investment vehicles, or venture capital funds that are registered as 40 act companies do not have to file a BOI report. 5013 c tax exempt entities is another one.

Frank Tumminello: 19:30

You know, to receive a tax exemption, obviously, you you have to kinda check more than a few boxes to to get that, that benefit. Certain certain inactive entities that have truly been dormant for, you know, 12 months or longer and actually have to meet 6 different parameters, which I won't unpack, on this on this conversation, but happy to follow-up for any listeners that have questions around that. So there there are some some exemptions. I think they are, pretty specific. And, ultimately, you know, millions of companies will will not unfortunately be exempt, thus have to file.

Frank Tumminello: 20:04

Tens of 1,000,000, in fact.

Adam Larson: 20:06

So in other words, do your homework to know if you have to file or not is basically what you're saying.

Frank Tumminello: 20:11

Yeah. Yeah. Exactly. And, you know, we have a bunch of great tools on our website, such as our BOI quiz. It's free to use.

Frank Tumminello: 20:19

It takes about 10 minutes. It's an interactive experience where you can kind of just jump on, the website, answer 5 or 6 questions, and kinda see if you may or may not need to file a BOI report. Now we believe 97% of private companies in the United States will have to file a BOI report, so not to, kind of ruin the culminate come all culminating moment of the quiz, but, you know, most folks will will will have to, you know, file the report. And and the great part about the quizzes is we'll actually walk you right into filing your report and use all your information that you disclosed in the quiz on the form, so there's no redundancy. And, yeah, you know, this this is something that ultimately, I think, might be harder to outrun than to necessarily get compliant with.

Frank Tumminello: 21:03

I think a lot of folks have, you know, obviously, by the numbers, dragged their feet, as as this has gotten rolled out. Still believe a lot of that is due to lack of awareness. So I'm not I'm not kind of stepping over that fact, but, you know, 6 months is gonna fly by, you know, between the summer holidays, you know, Thanksgiving, Christmas, I can attest that. I certainly don't wanna be chasing down, my fellow beneficial owners for their IDs over over the Christmas table or or whichever holiday you choose to celebrate around that time of year. So, you know, just ultimately trying to spread education, I think, is is really important if you are a a a CPA, with with a a book of clients.

Frank Tumminello: 21:44

And, also, just determining, you know, is this something that you're gonna actually wanna do for your clients, or is this something you might deem, perhaps unauthorized practice of law or per perhaps your your professional liability policy not actually covering from an insurance standpoint? So, McGowan and Pro is actually a pretty prevalently known insurance brokerage that, you know, insures thousands of of accountants across the nation. We've done a lot of thought leadership with them to determine, you know, the right approach for CPAs is if it's best to actually do the work, potentially make make a few few bucks kind of distributing VOI services to your clients, or even just outsource the work completely, to kinda keep it arm's length. And, you know, in either case, file forms can help provide you a workflow solution or be your referral partner. Or even some folks just kind of share our website, www.fileforms.com, directly with their clients and, trust that their clients will will do it on their own.

Frank Tumminello: 22:40

But a lot of CPAs, you know, they don't wanna answer the questions. They don't have enough time to kinda get up the learning curve on this stuff. They're potentially over overwhelmed already with with kinda tax, prep services or or other other types of, you know, services around finance. So, you know, you kinda, once again, look yourself in the mirror to determine, you know, is this something I'm willing to jump 2 feet into, or is this something I'd I'd rather just put on the radar of my clients so that they're aware, but then ultimately, you know, have the work go to someone like the platforms.

Adam Larson: 23:13

So you mentioned just now the the file the filing deadlines are looming. You know?

Frank Tumminello: 23:18

Correct.

Adam Larson: 23:19

What are the what are

Adam Larson: 23:19

the potential consequences for companies? You already mentioned the fines, but are there other consequences that companies could face if they if they don't

Frank Tumminello: 23:27

file? Yeah. Well, let's let's first start with the deadlines. You know, effectively, all businesses that were formed prior to January 1, 2024 must file their BOI report before January 1, 2025. So that that is kind of 6 months.

Frank Tumminello: 23:41

If you haven't done it already, you're just learning about this on your on this podcast today, you have 6 months to file. So, once again, try to avoid the the fire drill, you know, trying to avoid folks just forgetting about this completely and getting blindsided by a fine. Now if you formed a business on January 1, 2024 or after that date, so any businesses formed within the year of 2024, you only have 90 days from your formation date to file your BOI report. So what does that mean? That means businesses formed in January, February, March are starting to all be facing deadlines or past their deadlines and could be accruing fines that are substantial.

Frank Tumminello: 24:22

So we discussed, the $591 per day fine that accrues. It goes up to $10,000 upon reaching that $10,000 threshold. Now there are civil and criminal penalties on the line. So folks receive that notice that they're getting fined $10,000 for effectively effectively being delinquent for 18 days, only 18 days. Now there's there's potential jail time on the line and other other other issues.

Frank Tumminello: 24:47

So, this is this is not something the government's taking lightly and, certainly not a a liability you want accruing on your books.

Adam Larson: 24:56

Yeah. You definitely don't. And I'm sure it would be the officers of the organization who would be greatly affected by that jail time. Correct?

Frank Tumminello: 25:03

Yeah. Exactly. You know, we're starting to, you know, see within operating agreements of businesses being purchased this year that, you know, the beneficial owners of the transaction or the shareholders or the c suite executives are now how having to sign in those agreements that they will, perpetually, you know, report and disclose their information willfully and accurately, as a function of being affiliated with that reporting company. So you're starting to see this become part of corporate, operations and legal, structures and and contracts within the United States as of this year.

Adam Larson: 25:41

So as we look ahead to the future, how do you think this transparency at the corporate transparency will impact the business landscape in the long run, you know, for businesses that are being created and just also as it hopefully maybe cleans up some of the, some of the things that they're trying to root out that we mentioned earlier.

Frank Tumminello: 25:59

Yeah. You know, I think, you know, this will quickly become part of forming an entity in the United States. And I say that because, actually, I mentioned the 90 day window for newly formed entities, in 2024. That 90 day window actually shrinks to 30 days in 2025. So if you form an entity January 1, 2025 or beyond, you'll actually only have 30 days to file your BOI report.

Frank Tumminello: 26:25

So, you know, this is this is gonna become more prevalent. I think it's gonna become more common practice. I think we're gonna break that inertia this year as folks get their initial reports in. And, hopefully, from this point forward, the government will be able to police the the the kind of money laundering going on in our nation because they'll have, more clarity, more transparency, amongst the the the private companies in our nation.

Adam Larson: 26:51

Well, Frank, I really appreciate you coming on podcast and really explaining all this to our audience, and I encourage everybody to check out the links to file forms. And if you wanna connect with Frank on LinkedIn, and just ask more questions, please feel free to do so. And, Frank, just thanks so much for coming on today.

Frank Tumminello: 27:07

Absolute pleasure, Adam. I really hope we can be as helpful as we can. You know, we work with, hundreds of attorneys, hundreds of CPAs, large large volume of family offices, real estate funds, you know, everyone from kind of the mom and pop business on Main Street all the way to some of the largest, legal entity management service providers and kind of business communities broadly speaking. So we have a direct integration with Vinsen, for secure filings. You know, we we do instant filings in 10 minutes.

Frank Tumminello: 27:38

So, really hope we can be helpful whether you're choosing to to do this work on behalf of your clients or ultimately refer the business out. We do offer a revenue share as an option for folks, if you're choosing to to refer business out. So that that certainly could be a a viable way to kind of monetize BOI without assuming any of the risk, and there's actually no upfront cost for that. So please go on to our website, www.fileforms.com. There's a link to become a partner.

Frank Tumminello: 28:06

You can read about our our enterprise pro solution or become a referral partner or even just file for for your firm and give it a shot. So, but thank you so much, Adam. This is great. We're always happy to kinda get on the loudspeaker and and share as much as we can about this new law. And we do a bunch of events weekly, podcasts, webinars, you name it.

Frank Tumminello: 28:28

So we wanna give our partners everything they can from marketing collateral to landing pages to, you know, thought leadership, broadly speaking, to ensure that they have the answers they need to best serve their clients. So we'll leave it at that, and, thank you so much

Announcer: 28:46

for for hosting. This has been Count Me In, IMA's podcast providing you with the latest perspectives of thought leaders from the accounting and finance profession. If you like what you heard and you'd like to be counted in for more relevant accounting and finance education, visit IMA's website at www.ima net.org.