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NEWLY PASSED Corporate Transparency Act (Entities MUST Disclose Beneficial Ownership in 2021) - YouTube
Channel: Clint Coons Esq. | Real Estate Asset Protection
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- Hey guys, in this video I wanna talk
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about the Corporate Transparency Act
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that was recently passed
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as part of the National
Defense Authorization Act.
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You know, they just kinda
buried this provision
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in a defense bill.
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It never ceases to amaze
me how Congress works
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when it comes to passing bills.
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You think they're about one thing,
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and they always seem
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to put so many other
little clauses in there.
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Kinda reminds me of an
insurance contract, right?
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Your contract with your insurance company,
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you think you have X
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and you find out you also
have Y and Z included,
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but no one really told you about it
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unless you read the fine print,
so what is all the concern
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about the Corporate Transparency Act,
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and why are you seeing now these headlines
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that are out there
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in various news publications
discussing the implications
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of this?
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Well, it's something that
actually came about last year
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and passed Congress, but had
not been signed into law,
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and what it's designed to,
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I guess, address or fight
is what they consider
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to be money laundering.
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And so how is this taking place
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and where is this perceived issue?
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Well, Congress perceives
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that there are a number
of states out there,
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there's actually 16 states
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that do not collect
information on individuals
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when you set up a corporation
or limited liability company
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in that state.
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Now if you watch my videos,
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I talk about Delaware and Wyoming
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as being two great states
because you can have anonymity.
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Now, the thinking here
is that people come in,
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they set up these what they
call shell corporations
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in Wyoming or Delaware, and
then they proceed to engage
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in transactions and either
not report their income
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or they money launder drug money
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or ill-gotten gains here
in the United States
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because there's no
collection of information
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on who is actually behind these entities.
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In fact, I've dealt with the IRS on this
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on occasion before over Nevada entities.
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Their concern was that they didn't know
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who was actually the owner of the company,
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and my, we actually
brought up to them the fact
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that whenever you set up an
entity like a corporation
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or an LLC, in order to do banking,
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you have to acquire an EIN number.
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Now in order to acquire that EIN number,
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what do you have to do?
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You have to submit who
is the responsible party
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for that entity to the IRS,
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provide them with their
Social Security number
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to attain an EIN,
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so you actually give them
the information already.
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So if you're wondering, how
is this going to affect me,
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just know this, as I get into it,
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you've already provided this information.
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If you set up a business
entity or we set it up for you,
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when we set up that entity,
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we let the federal government know
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who is actually the responsible party
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by providing them that information,
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so even though it's not listed
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on the Secretary of
State's website, the IRS,
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the federal government still has it.
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But here's something interesting to note.
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Here in our conversations with
the Internal Revenue Service
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on providing this information,
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they actually told us they
didn't have a way to pull it,
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that they could not reference
that information themselves,
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and they needed another person
to provide that to them,
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namely the state or the attorneys
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that set up the information,
but I found that to be odd
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that they couldn't actually
delve into their own database
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and run a simple query
search to determine this,
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but ay, we know government's
efficient, don't we?
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So what should we expect?
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Anyways, back onto this bill.
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So here's what they're thinking,
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that by passing this
Corporate Transparency Act,
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what it's going to do then is
discourage criminal behavior,
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to prevent people from laundering money.
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Now, if you think about it,
most rational people say,
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what laws have we ever passed
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that actually stops behavior like this?
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I mean, if you speed, do you get a ticket?
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Yes, and people speed all the time,
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and we have laws against speeding,
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but that doesn't stop
people from speeding.
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And you could go on and on
and make these same analogies.
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So the well-intentioned
people behind this bill
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thought this would be a great idea
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to prevent individuals from
setting up corporations
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and not disclosing who the owners are,
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if we make them provide
the owners' information
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to another government database, FinCEN.
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So what they wanna require
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is that you're going to
have to provide information
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to FinCEN, and what they're looking for
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is if you set up a corporation,
a limited liability company,
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or what they added in the final bill
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is that another business entity,
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a similar business entity
organized under state law
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as you can see here, and
really what this comes down to
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is I think what they
were trying to address
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is the fact that people can
create trust, business trusts,
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and they can get around this.
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Now, if you're not setting
up a business trust,
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you could set up another type of trust
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that's not a business
trust or a statutory trust,
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like for example a
Delaware statutory trust,
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and still technically not have
to disclose the information,
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so the drafting language here
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in Part A I think is kinda weak.
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If that's what they're going to,
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people will just find a way around it,
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but if they're using business entities
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such as limited partnerships,
statutory trusts, foundations,
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they're, in my interpretation
or reading of this,
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are probably gonna have to
provide the owners' information,
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and so who are they looking for?
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They're looking for anybody
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that has substantial control
over the business entity.
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You have to provide that information
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to the federal government,
or those individuals
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that own 25% or more of the company.
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That information's gonna
have to be provided as well.
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So what information are they looking for?
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Well they're gonna be
looking for your name,
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your Social Security number,
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and I believe a copy of
your driver's license
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or a copy of a passport,
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and that's gonna have to be
updated each and every year.
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Now failure to do this
will result in penalties
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of up to $10,000 and
possibly two years in jail.
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So the thinking is is that
by requiring individuals
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to supply this information,
it will cut down
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on any types of tax
evasion through the use
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of what they term shell companies
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or money laundering activities.
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Now, let's face it.
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If you're already a criminal
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and you're gonna engage
in criminal activity,
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how is this going to stop?
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You think now they're gonna say,
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oh, I have to disclose this information
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and I don't want them to
know that I'm doing it?
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Of course not.
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They'll just use someone else,
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some shill to step into their place
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to provide their information
or maybe they'll use false ID,
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buy somethin' from China.
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You can get plenty of fake IDs over there
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and supply that information
to the federal government.
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Who knows?
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But will it actually cut down on it?
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Probably not.
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Just another meaning, well,
I wouldn't say meaningless,
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but well-intentioned law
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that probably won't have any real impact
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other than to affect small
business owners like ourselves
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who have to remember now
here is one other thing
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that I have to do every year
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to keep my business entity in compliance.
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'Cause the last thing I want
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is the federal government coming after me
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and slapping a $10,000 fine on me
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because I forgot to send in
one form letting them know,
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hey, I already told you I
file a tax return for it
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and I own this company 100%,
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you have it with the IRS
as well when I applied
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for my EIN number,
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but let's give it to
another governmental agency
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because your databases
can't talk to one another.
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You're incapable of
mining this information
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and figuring it out on your own,
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so let me just keep screaming
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from the top of a hill who
actually owns this company,
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while the criminals continue on
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with their nefarious activity
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because no law is really
going to stop this.
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Now there are some other reasons
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why people have advocated for this,
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and if you watch my video on
setting up LLCs in New York
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when New York recently
passed a law requiring you
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to disclose the owners,
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this is the concern that they
have is that there's a lack
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of affordable housing,
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which I found to be kinda
interesting the way they take this
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and stretch it out.
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Some publications have
indicated that the reasoning
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behind creating this
Corporate Transparency Act
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is so they can find out
who the actual owners are
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of these companies that
are buying up large swaths
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of real estate, expensive real
estate, in certain cities,
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San Francisco, New York,
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and then they're not moving
into these properties,
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they're letting them sit vacant.
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Now what the argument is
is, as I understand it,
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is that by allowing companies,
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shell companies that have anonymous owners
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to buy up this property
and park their money here
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in the United States,
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it creates a lack of affordable housing.
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Well, I don't think a penthouse apartment
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in New York would qualify
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as affordable housing
regardless who bought it.
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But they said that that puts pressure
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on the market in general
to drive up prices,
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because that money's pouring in.
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Now, the fact that you don't
know who the owners are
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or you do know who the owners are,
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I don't see how that's going
to stop this from occurring,
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because the information that
is gonna be collected by FinCEN
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is not actually available to the public.
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So yes, they're gonna
collect this information,
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no, you're not gonna
know who owns it anyway,
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so if you wanted to engage
in a public pressure campaign
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against other individuals who
are just buying up real estate
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and paying inflated prices for it,
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I mean, come on, it's their money,
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why can't they do what they want with it,
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then how is this going to help you
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to stop that type of activity
if affordable housing
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is your number one concern
in these specific locations?
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There're probably better ways
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to address it like they have
tried to do in certain places
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by requiring developers put
in so much affordable housing,
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or in their units have
so many units dedicated
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to affordable housing
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when they have a certain type
of property that they built
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and they're going to lease it out.
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But, again, I guess
it's, comes down to this.
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The more information we
can collect on individuals,
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somehow we feel that this is
going to help prevent crime,
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and at the end of the day, it'll probably,
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in my opinion, have a
less-than-meaningful impact
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on the type of activity
they're trying to prevent,
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but who knows, we'll see what happens.
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Hopefully it does, if it,
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there is a lot of crime
like that taking place,
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stop it, but the, for the
average individual like ourselves
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who are setting up LLCs for real estate,
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corporations for our small business,
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it's just another hoop
you have to jump through.
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Information that you supply
to the federal government
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on an annual basis, it's
gonna be held, as they say,
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strictly confidential, unless
someone hacks the database,
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and that information is
not gonna be released
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to the general public.
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You're just gonna have to make sure
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you're doin' it every year.
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That's why it's good to
have a registered agent.
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As, at Anderson here we
serve as registered agents
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for 20, 30, 40,000,
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I forget how many
companies we now work with,
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and we keep that in for,
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or that's something that
we remind our clients of
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on an annual basis in addition
to their annual filing.
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So when you're considering this,
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you don't wanna run afoul
of this law for sure
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because of the penalties, and I'm sure
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they're probably gonna
give you one or two passes
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if you do make a mistake
and you forget to file it
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and they'll warn you you need to file it,
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but it's, again, it's something,
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you don't wanna get on
anybody's radar screen,
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so by using a professional
service to remind you
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of all the additional filings
now that you have to do
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on an annual basis to
maintain your entity,
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is probably a good idea.
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There's a lot of companies out there,
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thousands of companies that
offer that type of service
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for you business entity,
so I would probably suggest
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that you keep that in mind.
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Hey guys, if you've liked
this video, give me a like,
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and if you haven't
subscribed to my channel,
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be sure to subscribe to it
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'cause I got a lot of great
content coming out this year.
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We've got, with the change
of the administration,
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what's gonna happen
there with the tax side,
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you're gonna wanna know that,
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especially if you're
a real estate investor
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or small business owner.
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So take it from that,
Corporate Transparency Act,
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not that big a deal at the end of the day,
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but you need to know about it
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because they will be releasing guidance
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on what has to be reported
on these business entities.
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And oh, by the way, if you have
an existing business entity,
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don't fret.
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As I understand it right
now, you have two years
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before you have to start
reporting that information,
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but on the new ones going forwards,
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well, we're gonna have to come up
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with that reporting right away.
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All right everyone, take care.
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