Paid To Create Podcast
Fireside chats with some of today’s best and brightest Creators
Welcome to Paid To Create, a podcast that features insightful conversations with some of today's most successful entrepreneurs and small business owners.
Join us as we delve into the minds of coaches, consultants, agencies, and experts from various industries to discuss their experiences, strategies, and journeys to success.
Our guests have a wealth of knowledge and expertise in their respective fields and will share their insights on what it takes as a creator to build and grow a successful business.
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Paid To Create Podcast
S2E9 Urgent PSA for Entrepreneurs: Avoid Fines and Jail Time Under the CTA
In this critical episode of Paid to Create, Sarah teams up with corporate attorney Grant Teeple to deliver an urgent message for business owners everywhere: the Corporate Transparency Act of 2024 is here, and ignoring it could land you in serious trouble. With fines of $500 a day and potential jail time for non-compliance, this isn’t a law you can afford to overlook.
Grant explains who’s on the hook—spoiler alert: it’s not just Wall Street—and what steps you need to take to stay compliant. From reporting requirements to privacy concerns, you’ll get a clear roadmap to protect your business and avoid the severe penalties that come with violations.
If you’re an entrepreneur, small business owner, or decision-maker, this is your wake-up call. Tune in now to find out how to navigate this game-changing law before it’s too late.
Listen or watch all episodes of Paid to Create at paidtocreatepodcast.com
Learn more about CTA Portal at ctaportal.us
Hi there and welcome to today's episode of Pay2Create. I'm Sarah Jenkins and I'm sitting here with my attorney and friend, grant Teeple.
Speaker 2:Good morning. How are you, Sarah?
Speaker 1:I'm great this is a PSA public service announcement because we can go over some special things that I learned about for your company and your business. That, frankly, shocked me, and the whole goal of having a good corporate attorney is to make sure that your ass is kept out of jail. Mine so far has been he keeps track of it all the time, all those decisions. There's a couple of things in particular that I wanted to ask you and you're a professional at anyway, this is what you do all the time but the specifics that I think might help someone that listens to these kind of podcasts is to get these details down, if that's okay.
Speaker 2:Absolutely. How can I help All?
Speaker 1:right. Give us a scoop. What is this Corporate Transparency Act and why should our audience of small business owners even care?
Speaker 2:Well, they should care, because if they violate this act, the Corporate Transparency Act, they can go to jail for up to two years and have a $500 a day penalty, just because they own an entity and they don't provide certain information about that entity to the US government. So for each corporation or LLC that you may own, for each one, even if one owns another for each one of those you have to provide certain information to the federal government by the end of this year or else you're subject to that $500 a day fine and the potential criminal penalty.
Speaker 1:That thing we talked about. Let's not. Let's not go to jail, let's not go to jail, let's not. Do it Right on. That's super, super important. Who's on the hook for this? Is it just for Wall Street big shots, or do the mom and pop shops need to pay attention to this particular rule as well?
Speaker 2:Yeah, the answer is both, and in fact, it's not only the owners of companies that are on the hook for it, but it's people that work in the companies that are on the hook.
Speaker 2:What, yeah, that's right. So if you're a controlled person, if you're a CEO, a COO, a senior decision maker in the company that you affect the material activities of the business on a day-to-day basis, you have to have your information up there. So let me set the stage If you own more than 25% of the company or your senior management, the company has the obligation to make sure that your personal information goes up onto the government database. That means their name, their address, their date of birth, and we also need to have a current picture of either your passport or your driver's license, and they have to be active and in good standing. So that means they're also going to have your hair color and your eye color and all the other information that's on those pieces of identifying documents like the driver's license or the passport, and you have to keep that information current. And so it's a big job, because many companies may have 5, 10, 15 reporting people that they have to keep the information up and current on.
Speaker 1:Who decides which people in the company to be up on there?
Speaker 2:So the rule is there's two tests. The one test is super easy if you own 25% or more of the company. The other test and maybe I shouldn't say it's super easy, because what if you own 25% or more of the company? The other, and maybe I shouldn't say it's super easy, because what if you have a company that has 10 owners that own all 10%?
Speaker 1:Or, like you said, that company that owns another company. Now you have to think all that stuff through.
Speaker 2:That's right, and this applies to trusts, partnerships, all these types of entities. And so the ownership the 25% threshold, that's fairly easy. Everybody generally knows if they own 25% threshold. That's fairly easy, everybody generally knows if they own 25% or more. The next test is do you have a material effect on the day-to-day operations of the company? Again, that's like a president, a CEO, a COO, sometimes your CTO, your chief technical officer, maybe a software company, or you're even perhaps a human resources person. So if you meet either of those tests, we need all that personal information to be put up on the government database and kept current.
Speaker 1:Luckily, I don't have to figure that stuff out. I will just ask you who in my company needs to be on the report, and then you can do that for me too. Sure, I love that part.
Speaker 2:We are doing that for you.
Speaker 1:My favorite part of the business ownership when you do that job. And then let's talk about beneficial owners. That sounds fancy, but what does it mean in plain English and why does Uncle Sam need to know?
Speaker 2:Yeah, so beneficial owner B-O-I the beneficial owner information is really that the government put the statute in place to try to attack money laundering and people who are running companies surreptitiously, even though they might not be listed on the company. So they're trying to get behind the veil of who are the secret black. You know black black operations owners. And the test again for beneficial owner is 25% or more or the control. And that's funny. You may not actually own any of the company but they treat you as a beneficial owner if you're one of these control people. So the government says all of these people are the beneficial owners. And just to be clear, this law is being enforced by FinCEN, which is the Financial Crimes Information Network. And yeah, that's the federal government and violating their laws is a federal felony, it's a federal offense. It's a pretty severe sanction. The government is basically now weaponized your bankers, your lawyers and your CPAs against you to get all this personal information into the government database and they swear they'll keep it secret. But I don't think anyone believes them.
Speaker 1:No, it's not a secret If you're telling the government and you have to report it by a certain date or else that doesn't seem like a secret to me.
Speaker 2:They say they're going to keep the fact you have to report. It's not the secret. They say, once the information's up there, they won't tell anyone your personal information. And you know, if you believe the government then I'm sure that'll all work out just fine.
Speaker 1:Fuck.
Speaker 2:So for you know hacks like the FAA, hack that information out to the world already.
Speaker 1:Things never happen. Nothing stays secret in this world, is my experience. Just curious, why would somebody not want to report that? Or why is their company? Is that these things are a secret? Like, what's the point of a secret in that realm?
Speaker 2:You know, I think the concern for the company is if you got 5, 10, 15 people you have to report. Now you have all this personal sensitive information. You know identity theft is a huge problem, I see. So now the company's got to collect all this personal information, which an identity thief would love to have access to a database of the richest and most talented people in your company Business owners Because they're owners and these are the people who are going to have money and that's who you want to steal the identity of. So it's a very sensitive thing for the company to collect all this information. What company has copies of their employees' passports and driver's license? The answer is none, but now you're going to have one.
Speaker 1:We actually had a couple of those collected when we did the work from home starting 2014,. Because there's another weird law about you have to make sure the person you're hiring is the person they say they are. I was like, okay, that makes sense. So we've had a couple passports, but not many. This sounds like another box to check for already very busy business owners. How big of a headache is this compliance really and how could we make this easier for the business owner?
Speaker 2:Well it is. It is a headache because again you have to go to your employees and ask them please give me a copy of your driver's license, please tell me your date of birth, and you have to have all that personal information you know organized, and making sure this is the key. Once you upload all that information let's say you have 10 people in your company, you've uploaded that information. If any of them move and get a new address, or if their driver's license expires or their passport expires, you have to update it, and so the company has to be vigilant to make sure that their reporting persons in their company have a current driver's license or passport. If you don't keep it current within 30 days, you're back to being in violation, you're back to the $500 a day penalty and you're back up to the two years in jail.
Speaker 2:And here's the challenge. If a company goes to be one of the challenges, let's say you're a company and you don't comply, you decide I'm not going to comply, and then someday you want to sell your company and you don't comply. You decide I'm not going to comply, and then someday you want to sell your company. Well, anything, any good lawyer when we do the due diligence on that acquisitions now on our due diligence questionnaire is questions designed to see if you're been complying with the corporate transparency act, or two.
Speaker 2:$500 a day times 365 days in a year is a whole heck of a lot of money, right? You're talking what? 150 grand a year and times a couple of years Now you've got when we go to buy your company or when you go to sell it. If you haven't been compliant now, I've got to reserve that money and set it aside until the statute of limitations runs on that or until you go comply. So it is a big pain in the ass and it is a it is one that has serious financial ramifications if you don't stay current with it.
Speaker 1:Good thing it's not my job. Yeah, for the procrastinators out there, you know who you are. What happens if you do miss that deadline or you mess up, you forget?
Speaker 2:Yeah, Nobody really knows, because the first enforcement of this law is going to happen after the first of this year and you can bet they're going to make example of as many people as they can to create a sense of urgency for people to do it, Because so far the evidence is people aren't really complying as quickly as they need to. Most companies haven't complied as of right now, but it does appear to me. My view is, if you miss the deadline but then you come compliant, you're probably going to be okay. I doubt they're going to go back and say, hey, you weren't compliant for two or three months and now we're going to ding you for the fine. I think they're going to be happy that you're compliant, but you can bet they're going to try to make an example of somebody out there and somebody's going to pay a big bill for not being compliant.
Speaker 1:I don't know, though the statement of information. You miss that deadline, you get the fine. It's $1,000.
Speaker 2:Yeah, so that's on the state level and I agree, especially the state of California. They're very good about doing that, fine, and if the federal government is as strict as the state of California, this is a super serious event to miss and to not be in compliance on.
Speaker 1:That's kind of what I was feeling about the strictness of these penalties over your head. Some people are going to freak out about that. Privacy, like you know, does this mean the government is peeking into their business, such as you know where they live, you know where their child is sleeping and breathing in whatever at night or in your underwear drawer. What else do they want to know?
Speaker 2:Yeah, and the privacy is a big concern. That's why one of the solutions that's out there to do this is if you go to CTA portal like charlietomalphaportalus ctaportalus it's a portal that's run by my law firm and the value of that is that not only do we organize the information for you, we upload it to the government. You'll have an audit trail so you can see what you've uploaded and when, and anything that you send us, because it's run by the law firm, has the attorney-client privilege, so you can assure your people in your organization, whose information you're collecting, that it's going to be protected by the attorney-client privilege before it goes up to the government database.
Speaker 1:That's a huge perk. I like that one a lot. What is one simple thing every business owner listening today should do right now to get on the right side of that law. Just that website.
Speaker 2:I think that'd be my answer. I think I would go to ctaportalus and I would get everybody's information that I need to up on that website and then have that automatically uploaded to the government the government, because one of the other values of the website is, let's say, you have 10 people that are reporting and somebody's driver's license expires. Well, our database monitors all the dates of those IDs and we'll send a notice out to you saying hey, did you know your CEO's driver's license is expiring in 30 days. Go out and get a new one. Let's get that information. It will prompt you affirmatively to keep you current on a going forward basis, so you don't wake up later finding someone hadn't expired an ID and now you've been non-compliant and you didn't know it. So this kind of watches out for you and provides notices. So I do think it's just as simple as going to ctaportalus and clicking through the easy steps, filling out the information and getting it up on that website database.
Speaker 1:So when you have to keep the information current, I didn't even understand that I needed to know exactly where my directors, or whatever, lived. Like they're residents or whatever. Like I don't, I don't get that.
Speaker 2:Well, you know, at least for the purposes of this. Now, if it's a control person, you do need to know that and you need to make sure that's up on the database that's kept current. If somebody moves, you have to tell your employees, or at least the ones that are reporting, to make sure to notify you when they move so that you can keep that database current. If you don't do that within 30 days, $500 a day, fine, two years in jail maybe.
Speaker 1:I'll take the fine, please, but neither.
Speaker 2:I'll take the fine or neither also.
Speaker 1:Okay, and is this act just the tip of the iceberg for transparency laws? Or, once we're compliant, can we just sort of relax?
Speaker 2:Well, that's a big philosophical question. You know, we've seen the Fourth Amendment slowly eroded, one little baby step out of time over time. You know the government, if you remember the NSA, the National Security Agency, and all those scams where they knew everything about us and they allegedly stopped doing it. But I think, at least on the business side, that's probably the tip of the iceberg. It is only this, seems to me. All the regulations only tend to require less and less privacy for you and more and more invasion by the businesses. I will tell you that this standard of having this beneficial owner information for a company is actually a world standard. The US is a little slow to the game here. All of my international clients, we've been having the it's not called the Corporate Transparency Act over in Europe, but we've been having the same experience over there. Anytime we do any kind of banking or have any entity set up, all this information is required. It really is kind of a world standard that the US has finally adopted.
Speaker 1:I mean we're always late to the party.
Speaker 2:Yeah, that's right.
Speaker 1:Is there anything else that we're missing you just want to touch on? I mean, I guess go tell all your employees that have control and interest to let you know when they move if they move. Yeah. And then, oh, I have a weird one. What if you don't have a passport and you lose your license?
Speaker 2:Yeah For some reason it happens. Yeah, they'll have to go out literally to be in compliance. They're going to have to go out and get a license or a passport for you. There is no feature in the government database that allows you not to include that information. There's no excuse. There's no exception.
Speaker 1:You don't have a driver's license. What if you never drove?
Speaker 2:You know, if you don't have a driver's license, you Well, it doesn't have a driver's license. What if you never drove? You know, if you don't have a driver's license, you never applied for a passport I would wonder if you're really going to be a CEO.
Speaker 2:Probably not, probably not. But if you're not, you may make new law in the United States. There may be an exception for that. As a matter of fact, just as an aside, there's been a few courts here in the US federal courts who have had before them the legitimacy of the CTA Corporate Transparency Act, and a lot of people are trying to have it struck down because it's too invasive and too burdensome on the businesses. But so far none of those actions have been successful and I suspect, because it is the world standard, that, whether it's this act or affixed to it, this is here to stay. Very weird it is. Thanks for having me.
Speaker 1:Man, thank you for your time. Thank you for the information. I think it's incredibly important and I have a couple of brothers with businesses to call right after this.
Speaker 2:All right, sounds good. We'll see you on ctaportalus. Thank you.
