Heidi Hart featured on BCF ORG Podcast - The Business of Business.
Photo courtesy of Unsplash @homajob
BCF ORG Podcast Episode 106 discusses the Corporate Transparency Act with Heidi Hart.
Heidi Hart uses her years of legal experience in reviewing the Corporate Transparency Act. Her experience as a business relationship consultant underpins how she strategizes and executes her client’s corporate transactions; from necessary governance issues to commercial contracts, including buy-sell agreements, asset purchase and sale agreements, shareholder and employee agreements, and real estate transactions.
Brian Fisher:
Welcome to episode 1 0 6 of the B-C-F-O-R-G Podcast, the Business of Business. I'm Brian Fisher. In the previous episode 1 0 5, our guest was Chris Pier discussing Don't Do Whack-A-Mole Marketing. This podcast series is targeted to business owners and c-suite executives. It reflects my 34 years as a business owner and subsequent years as a business mentor and consultant. It focuses on the various subjects and topics to help you run a successful, profitable business that are approximately 15 minutes long so you can listen while commuting. Hopefully, you'll find one or two takeaways to implement per episode. Today's episode discusses the Corporate Transparency Act with Heidi Hart Based out of the Los Angeles area. Heidi Hart is a lawyer with a lot of business savvy. She understands how businesses operate and provides sound business advice regarding all types of business and corporate transactions such as commercial contracts, forming or acquiring new businesses, buy, sell, and shareholder agreements, mergers and acquisitions, and corporate governance matters. Heidi is counsel at the law firm of Nolan Heimann LLP. In addition to assisting their clients across all types of industries. Nolan Heimann has an expertise in intellectual property and does trademark patent and licensing work. The firm is committed to providing integrated strategic and advisory services to its clients while honoring each client's vision and removing obstacles to their sustainable success. I actually had the pleasure of working with Heidi when I sold my business. Let's welcome Heidi Hart. Heidi, welcome to the B-C-F-O-R-G Podcast, the Business of Business.
Heidi Hart:
Thanks, Brian. It's really great to be here. I'm excited to give some insight into this topic we're going to be discussing today.
Brian Fisher:
Well, thanks for joining us today, Heidi. Heidi, I'm always interested in people's stories. What's your background in becoming general counsel at Nolan Heimann Law Firm?
Heidi Hart:
Well, actually I'm considered counsel, which is right below partner. I've been a lawyer for about 36 or more years. Don't ask me how old I am though. I started out very traditionally college law school and then I went into litigation. So I was doing business litigation and public works construction project litigation, and then I ended up transitioning to business transactions and corporate work, which was just amazing. I actually fell in love with being a lawyer all over again, and I really enjoy that kind of work. And I am counsel now at Nolan Hyman. They're in Los Angeles and we actually have offices and lawyers. Some are in Canada. We have 'em all over the United States. What I really like about them is they are creative, intelligent, and they're really a fun group to work with.
Brian Fisher:
Well, this episode's topic is the Corporate Transparency Act. What is the Corporate Transparency Act and what's its purpose?
Heidi Hart:
Well, the Corporate Transparency Act is a set of federal statutes. It was enacted by essentially the Treasury Department, and it went into effect in January of 2024. It requires most small businesses to file something called a beneficial ownership report with a federal agency called cent. And generally the types of business it applies to are corporations, limited liability companies and limited partnerships, any type of entity that has to file something with a Secretary of State, and that can be a foreign company as well as domestic companies. There are 23 exemptions, but I'm only going to talk about one, and I just want to start off by explaining it in case whoever's listening is curious about this. If you are a large operating company, that means you have more than 20 employees who work full-time in the United States and your last year's tax return shows more than 20 million in gross receipts or sales.
You are going to be exempt from this for any of the big corporations or big limited liability companies, et cetera. This really won't apply to you. There are other requirements to be a large operating company, but what I mean about small businesses is companies who don't have that many employees or revenues. So the purpose of the act is to come back money laundering and to identify fronts that are being used by criminal organizations. And if you think of Shell companies who concealed the true owner's identity, that's the kind of thing this set of statutes was intended to combat. What the statute does and how it's going to combat these fronts and money laundering is they're going to require small companies to report something called their beneficial owners, and we'll get into it later, but you'll have to be reporting a lot of the personal information regarding these beneficial owners.
So you can't hide behind the Shell company because we're going to get to the bottom of who the owners are, and that's what the is intended to do. Now, there's two different kinds of beneficial owners, two categories. There's a category where a person has significant equity in the company like stock or they have substantial control. There's a lot of guidance on how to identify these people. I'm going to give you two examples For a corporation. Shareholders who own or indirectly own 25% or more of the outstanding stock, they are going to be identified as beneficial owners. And then examples of who is in substantial control, those would be your C-suite officers, your CEO, your CFO, your COO, et cetera. So I'm going to give you an example of how this works and supports the Federal Government's Purpose Corporation has four equal shareholders, Bob, Ted, and Alice.
And Joseph owns his shares through an LLC, and he owns a hundred percent of the LLC. So Bob, Ted, and Alice, they're all going to be identified as beneficial owners because they own directly owned 25% or more of the outstanding stock. The government is not really interested in the name of Joseph's, LLC. They want to get to Joseph's identity because he's really the owner of the stock. So Bob, Ted and Alice will be identified. And then Joseph, who indirectly owns 25% of the stock. He's also going to be identified as a beneficial owner. That's sort of in a nutshell what the purpose of the statute is and what the federal government's goal is.
Brian Fisher:
Heidi, what are the requirements for filing who, what, where and when?
Heidi Hart:
Well, you're going to have to identify the beneficial owners of course, and there's a lot of guidance on the information you have to provide. But when is important right now, because if the company was formed sometime in 2024, you actually had 90 days in order to file your report. And if you didn't file your report because you didn't know about it, just get it on file. And if your company was formed before January 1st, 2024, you have until January 1st, 2025 to file the report. Now the where FinCEN has done a pretty good job of showing you where, so if you Google, and I know a lot of your listeners are driving, if you Google BOI, beneficial ownership information, BOI and FinCEN, you'll find a link to the FinCEN website and there's a reporting portal there that you can use no charge. And there are also services that offer filing, filing portals as well. And the good thing about using a service is if you have a lot of information that you're going to be reporting, you're able to save your work as you go along.
Brian Fisher:
We're speaking with Heidi Hart. Counsel at Nolan Heimann Law Firm. Heidi, do you ever need to update your filing, your initial filing? If so, when?
Heidi Hart:
If you ever have a change in beneficial ownership information or company information, then you'll have 30 days in order to update your report. Other than that, it's really a one-time filing. And let me just give you a very quick example of something that might happen along the way. In the ordinary course of your business, you might hire a new CEO or you might bring in a new shareholder. Those are the type of things you're going to have to update your report with.
Brian Fisher:
Heidi. Will the Corporate Transparency Act affect any employment or shareholder agreements?
Heidi Hart:
Well, I actually think it will, and it's to your benefit to the company's benefit to include something in employment agreements and shareholder agreements or operating agreements that require employees, members, and owners to provide you with the information you'll need to report in order to complete the report accurately. So what I've started doing is in shareholder agreements, operating agreements, et cetera, I've started including requirements that these new people always are obligated to provide the information needed in order to complete an update to the report.
Brian Fisher:
We're speaking with Heidi Hart, counsel at Nolan Hyman Law Firm. Heidi, is there anything I've not asked that you'd like to add?
Heidi Hart:
Yes. There's just a couple things. There are penalties of up to $10,000 and two years in jail for non-compliance, and I'm not trying to scare anybody, I just want you to know they're out there. Also, SEN has published a lot of guidance, so if you Google BOI and FinCEN in addition to finding the report, you'll find lots of guidance and there's something called the Small Business Compliance Guide, which is really helpful to get an understanding of what your requirements are. And also if you need additional guidance, then definitely reach out to your attorneys. And if you don't have anyone in particular that you can think of, you can always get in touch with me.
Brian Fisher:
Speaking of that, how can people get in contact with you? Heidi,
Heidi Hart:
You can get in contact with me through the Nolan Heimann website. I'm also on LinkedIn, and I think if people reach out to you, Brian, I think you might just give them my number.
Brian Fisher:
I think that could happen. Heidi, thank you very much. Joining us today on the B-C-F-O-R-G podcast, the Business of Business.
Heidi Hart:
Thanks, Brian. It's a pleasure.
Brian Fisher:
My sincere thanks to Heidi Hart for joining us today. Managing the performance of your company is one of the most important things you do as a leader. This podcast is on YouTube and over 20 podcast directories in search type B-C-F-O-R-G. Be sure to leave a space between BCF and ORG and don't forget to like, subscribe, or follow the podcast. If you'd like to reach out to me for business mentoring or consulting, schedule a speaking engagement, ask questions, make comments, suggest ideas, or potentially be a guest like Heidi, please go to bcf org.com. There's a red contact us button in the middle of the homepage. A LinkedIn symbols on the upper right. Click on that. If you'd like to see my profile. All the podcasts are available by clicking on the website podcast page in the reference bar. These podcasts will be released the first and third Tuesday each month. In the next episode 1 0 7, our guest will be Ed Meek discussing your investing playbook in business. Running a successful, profitable business is the ultimate scorecard. You are never done and can always be better. It tends to be more fun than work flustering at times, but can be very rewarding from B-C-F-O-R-G Corp. I'm Brian Fisher, wishing you the best. Thanks.