On today's episode, Evon is joined by Ali Oromchian, attorney with Dental & Medical Counsel, to review the new federal business entity reporting requirements under the Corporate Transparency Act.
They dive into which entities are required to report, what information is involved, deadlines to keep in mind, potential penalties, and more.
This impacts not only optometry practice owners, but also optometrists that own rental real estate in LLCs or partnerships and independent contractors or side businesses that created legal entities.
Have questions on anything discussed or want to have topics or questions featured on the show? Send Evon an email at podcast@optometrywealth.com.
Check out www.optometrywealth.com to get to know more about Evon, his financial planning firm Optometry Wealth Advisors, and how he helps optometrists nationwide. From there, you can schedule a short Intro call to share what's on your mind and learn how Evon helps ODs master their cash flow and debt, build their net worth, and plan purposefully around their money and their practices.
The Optometry Money Podcast is dedicated to helping optometrists make better decisions around their money, careers, and practices. The show is hosted by Evon Mendrin, CFP®, CSLP®, owner of Optometry Wealth Advisors, a financial planning firm just for optometrists nationwide.
On today's episode, Evon is joined by Ali Oromchian, attorney with Dental & Medical Counsel, to review the new federal business entity reporting requirements under the Corporate Transparency Act.
They dive into which entities are required to report, what information is involved, deadlines to keep in mind, potential penalties, and more.
This impacts not only optometry practice owners, but also optometrists that own rental real estate in LLCs or partnerships and independent contractors or side businesses that created legal entities.
Have questions on anything discussed or want to have topics or questions featured on the show? Send Evon an email at podcast@optometrywealth.com.
Check out www.optometrywealth.com to get to know more about Evon, his financial planning firm Optometry Wealth Advisors, and how he helps optometrists nationwide. From there, you can schedule a short Intro call to share what's on your mind and learn how Evon helps ODs master their cash flow and debt, build their net worth, and plan purposefully around their money and their practices.
The Optometry Money Podcast is dedicated to helping optometrists make better decisions around their money, careers, and practices. The show is hosted by Evon Mendrin, CFP®, CSLP®, owner of Optometry Wealth Advisors, a financial planning firm just for optometrists nationwide.
Evon:
Hey, everybody. Welcome back to The Optometry Money Podcast. Where we're helping ODs all over the country make better and better decisions around their money, their careers, and their practices. I am your host, Evon Mendrin CERTIFIED FINANCIAL PLANNER(TM) and owner of Optometry Wealth Advisors an independent financial planning firm just for optometrists nationwide. And thank you so much for listening. Really appreciate your time and attention. And on today's episode I am joined once again by Ali Oromchian, attorney with Dental Medical Counsel, to dive into a brand new federal business entity reporting requirement under the Corporate Transparency Act. And this is a brand new set of reporting requirements starting this year, 2024. And it's going to impact you, whether you own a private practice, whether you own rental real estate under an LLC, or simply an independent contractor or a side business, and you formed a legal entity for that. If you fit into any of those categories, you. You need to be thinking about how and when to file this new reporting. So hopefully this helps, you know, what it's about and what needs to be done. I've added all of Ali's contact information, as well as the main webpage and resources for this reporting into the show notes, which you can find at the Education Hub on my website, www.optometrywealth.com. And while you're there, feel free to schedule a no commitment introductory call. We can talk about whatever's on your mind financially and share how we help optometrists all over the country. Make better decisions with their cashflow. Invest wisely. Proactively plan around taxes and so much more. And without further ado here is my conversation with Ali Oromchian And welcome back to the Optometry Money Podcast. I am excited on today's episode. Well, maybe excited, it's too strong a word, but I, I, I, I am, I am ready to go into a really important new topic for optometrists, especially practice owners, but, but even more than practice owners, and that's new reporting requirements, under the Corporate Transparency Act and to guide us through that conversation. I'm excited to have back on the podcast, Ali Oromchian attorney at, Dental and Medical Counsel. Ali, thank you so much for coming back on.
Ali:
Yeah. Thanks for having me. Yeah, it's, it's, I want to, I, I always want to come back on'cause I always enjoy our conversations, but it seems like, you know, this time it's about a topic that very few of us, like expected to have to deal with, but it's become such a hot topic this year, so, so, but it's always fun to be here, so.
Evon:
So let's, let's dive in.'cause I just, in the conversations I've been seeing and hearing and having like, it, it just doesn't seem like a lot of optometrists are aware, of much about this new reporting requirement. Many have never heard of it before the last, you know, week or so, like it, it's something that seems to have come out of nowhere. What is the background to this? Where, where did this new reporting requirement, where did the Corporate Transparency Act come from? Where, what's, what's the background here?
Ali:
Yeah. you know, it, it, it's, it's sort of a, it's, it's, it's something that's been in play for a while actually. we knew about it, you know, about a middle to last half of last year. It wasn't so on, really on our radar to really kind of come out and talk about it because there's so many other things happening, but there's this entire movement that's occurring to protect against. shell companies being created by illicit actors. You know, we're not talking about. You know, optometrists in the United States, right? We're talking about, you know, optometrists in China. No, I'm just kidding. They're, you know, they're, they're not optometrists, but they're, they're just people around the world who may be creating, shell companies to buy real estate to buy stock to buy interest in private and public companies and doing various other things that the government wants to protect against. And so, so they've been kind of moving down this road for a while. As, as many of you probably know, if you go open up a bank account, they, they make you sign all this documentation that says, you know, you're a US resident and you're not a terrorist, and you know, all this other kind of stuff. And so this is just. Going down that same road. and, the purpose is very simple. They want to know the federal government, not the states per se, but the federal government wants to know who owns the various corporate entities that exist across the country. Right? And they wanna know not only who owns them, but also who's setting them up. And, and so, so that's, that's the purpose of the rule. And, and it went into effect on January one, 2024. So now, you know, anyone who is a corporation, LLC, and then some partnerships will have to make this reporting.
Evon:
Got it. So the stated goal, at least, is to sort of open transparency on who owns all these different entities and, and to fight, you know, criminal activity basically. Money laundering, any type of illegal activity happening with shell companies where no one really knows who, who owns different layered entities or whatever it may be. I'm sure everyone will come to their own conclusions about, new federal reporting requirements. But, that's the stated objective at least. And, so a, as you mentioned there, who needs to, or what type of entities need to do this reporting?
Ali:
Yeah, so, so basically it's any, any, any entity that must, register with their state has to report, you know, make this report, and file it. And so that includes all corporations. Doesn't matter if it's an S or C all LLCs, some partnerships will have to do it too. and you know, typically the partnerships that do are partnerships of individuals, as opposed to, partnerships of corporations because those are joint ven ventures and most states don't require joint ventures to be, to be filed with them. Of course. If you're a partnership of corporations, which is sort of the model that we recommend the corporations have to file, but not just, not the partnership. and so, so yeah, so, and the way, the way the rule is broken down is that. If you have an existing entity that was filed before January 1st, 2024, then you have the entire year of 2024 to make this filing. Now, most of our clients. Are asking us to do it right now for them because they don't want to forget about it. You know, when the end of the year comes, or, you know, systems go down, things change. And so we're filing a lot of these now just to kind of be done with it. if you are, if you are setting up a new entity in 2024, then for this calendar year, you have 90 days to file it. And then starting next year, you'll only have 30 days to file it. but most, people, that we incorporate this year, and we've already done, you know, gosh, I, I don't even know how many, probably 50 of them. we will be doing the filing for you, because it requires a lot of information that, about me as well as your filer. So, so there's just a lot that goes into it.
Evon:
Got it. Okay. So the, so the, the entities required to file are, don't include sole proprietors. So, so self employ, self-employment where there's no entity at all. So sole proprietors. Without an entity don't need to do this, but, basically any other entity that requires to file something with your state, is, is going to need to do this. And this includes not only practice owners, but if you own, real estate under, under an entity like an LLC, so it, it would include those as well, right? So you might have one individual with several entities that, that need to do this. And,
Ali:
A hundred percent. Yeah, a hundred
Evon:
F for an entity, like a, a practice where there are multiple owners, is it just one set of reporting per business or per entity? and then that one set of reporting will include all the information for, for all the owners. Like how does that work?
Ali:
Exactly. Yeah. It's one filing, but you need to list, you need to basically list all the beneficial owners and things of that nature, so, so yeah. So it's, it's one filing, but all this information about who, you know, who owns the entity and what that needs to be, needs to be included in it, so,
Evon:
Got it. Got it. And, and then, say again like where, where there's a situation where there's layers of entity. Where, where you mentioned where you might have, a, an s corporation that owns interest in a partnership, you know, for, potentially for an Optometry practice, something like that. Where there's layered entities, where there's one entity, like an S corporation that owns, you know, interest in another entity, like a partnership, which, which entity again is the one that's filing the, this reporting.
Ali:
Yeah, so, so the, the, the rule is that a reporting company is any corporation, LLC or other entity. That is formed by filing a document with a state. Okay? So if you have, let's say, filed a partnership with the state and you've paid those fees and all that, then you should be reporting that. Now, what I was saying earlier is that typically what happens is that a partnership will. I typically only file with the state if it's a partnership of individuals versus a partnership of corporations. Right. And, and because, because a partnership of individuals files with the state,'cause they gotta know that there's a partnership. A partnership of corporations is technically called a joint venture and that typically is not filed with the state. But those corporations that are the partners end up filing, of course.
Evon:
Got it. Okay. Okay. That, that makes perfect sense. and what is, like, what type of information is needing to be disclosed on, on these filings in terms of who owns it? Like what, what are they wanting you to put onto the, to the filing?
Ali:
Yeah. Yeah. So, so they, like I mentioned, like we were talking about, they want to know. You know who the beneficial owners are and they want to, you know, if it's a new entity, they wanna know who's forming it as well. You know, whether it's me or, you know, or your a lawyer or some other, you know, paralegal, whatnot. They wanna know all of that information. But, but basically what they, what, what they want is information about a beneficial owner. And a beneficial owner is defined in essence as either someone who exercises, substantial control over the company. Okay? And so substantial, right? I mean, what does that mean? But, but substantial. Or they own or control at least 25% of that company. So if there's someone that owns 24% or less, let's say, or you know, then, then they don't have to be sort of listed. But if they own more than 25%, they do. Or if they are some sort of, you know, manager that has substantial control. Now we are not necessarily, you know, putting office managers and those kind of folks on there, even though they sometimes have substantial control. I think, you know, right now it's just focusing on the ownership. Right. Whoever owns it, if they have 25% or more than they should be listed.
Evon:
Got it. So it's there including their, I'm assuming their name, address, iden, some sort of form of identification. Pretty, pretty detailed there, right?
Ali:
Yeah, exactly. It's just their Exactly. It's like their, you know, just basic information, driver's license information and whatnot. Just to be, you know, just to be identified. Yeah.
Evon:
Got it. So you, you mentioned some deadlines there, right? So if your business existed before the start of this year, you have until the end of the year. If you are starting a, a new entity this year, then it's 90 days, eventually after, after the new year of 2024, it'll be 30 days. What are. What are the, I'm assuming there are some penalties or some sort of consequences for, not filing or choosing not to file correctly, or accidentally not filing correctly. Like what, what do those, what do those look like?
Ali:
Yeah. The penalties are actually like really harsh. which is kind of surprising for something like this, but it, it's, it's, it, it, I mean the government is definitely not joking around. so, so they have, Civil penalties and criminal penalties, if you can believe it, right? So it's either$500 a day up to$10,000 is the civil penalties or whatnot. if you don't do it correctly, or, two years of imprisonment,
Evon:
Wow.
Ali:
right? And, and I shouldn't say, or did I say, or I meant, and, sorry. And two years of imprisonment. So, so not only could you be fined up to$10,000,$500 a day. But you could also go to jail for two years with this. And, and here's the crazy thing. It's not just, it's not just, you know, this initial filing. You also have a requirement to file within 30 days any change in the ownership. And I think that's what's gonna get people, because, you know, practices change hands, partnerships come and go. This isn't necessarily something that's on, on the top of people's minds, but I. You know, you know, if it, if they get audited and this and that, it's gonna become a problem. But it's, yeah, it's, I mean, it's a pretty serious thing. And that's, that's one of the reasons why so many people are doing it now. So
Evon:
Yeah, substantial penalties. I would hope the criminal penalties are reserved for those who truly are, are committing fraud, or, you know, willfully doing it, incorrectly. it, it does seem like there's a safe harbor for correcting accidental, you know, inaccurate reporting if you do it within 90 days. So it does seem like there's some leeway, but hopefully those criminal, criminal, penalties are, are reserved for those truly committing fraud here. But, so there is a requirement. I, I wanna talk about the requirement to update because it, because you mentioned there's a requirement to update with any changes. What change does that require? Is it a requirement in the. in the re, you know, the residential address of, of one of the beneficial owners is it require a new beneficial owner altogether. Like what, what actually needs to be required to be updated within 30 days of that happening.
Ali:
Yeah, the, the way they've described it is any incorrect information needs to be updated, right? So, so. Any incorrect information. Ob the obvious one is if there's new ownership, right? that's easy. But yeah, if you move, in theory, you're providing incorrect information and so you gotta, you gotta update it.
Evon:
This, this is like when, when someone moves, you know, they. Forget to update, like credit card, you know, with the new address and bank accounts and things like that. Like, there's a whole list of stuff that needs to be updated. I mean, this is a, it needs to be moved to the top of the list for sure. If there's, if there's some penalties that come along with it, and
Ali:
hundred percent. Yeah, a hundred percent. Now I, I I, I, do think there's gonna be some leeway there given Right. to, to some folks. but, but I do, you know, I, I do think it's, it's one of those things where you just, you know, as, as an advisor, that you are, that I am, the CPAs are, you know, we just. Just something that we have to keep in mind and have it be done, you know, as just part of kind of what we do. Right. and, and I think if you do that, you're gonna be okay. it's, I think the, the folks who just totally ignore it, I think that's, that's the people that, you know, if it becomes an issue, they're gonna, they're gonna make it an issue, you
Evon:
Yeah, it's, it's certainly gonna make its way to my, review checklist throughout the, throughout the years. But, so we, we. We, we talked about some changes then. So that's, that's an important note, a 30 day window to make, updates to, to changes in beneficial ownership. if you're going through a transition, you know, make sure you're leaning on your, your professionals, your attorneys that you're working with through that transition to, to update the reporting there. who are the people?'cause I, I've just been listening to the, on the tax professional side, sort of uncertainty of whether, CPAs can, can legally help with these reporting or, or not. you know, who are the professionals that can and should help, practice owners and, other entity owners with this filing if they need the help.
Ali:
Yeah. Yeah. You know, you know what's funny about that? I've, we've seen a lot of CPAs come and say that they don't want to do it, and I think they're. Being, advised by their malpractice carriers and others that that's not the place for them. So, you know, obviously we as lawyers can, can file it and, and we have been, people who incorporate you, you know, can file it. I would be a little bit concerned about going to some of these online agencies that file corporations to do it because. there's a lot of personal information that, you know, you kind of have to provide and give them access to. So, so I think, I think I would be a little bit wary of that. but, but, and then of course you can try to do it yourself as well. although a lot of people have said, look, it's kind of confusing. I'm not sure exactly what they're asking and so on and so forth. So they just are kind of avoiding, avoiding that.
Evon:
Yeah, that makes sense. Certainly for the listener. Just talk with your professionals and, and see, what needs to be done there. If you're having issues with that. I'll throw a link to the show notes, to the, uh, FinCEN which is the, the, part of the Treasury that's running this all to their portal, in, in terms of how to, how to do that and how to get in there and, lean on your professionals. I mean, this is just another thing unfortunately that we have to do as, as business owners, but. Lean on your professionals to give you the guidance that you need and, and to make sure it's done accurately and appropriately and avoiding all of these unnecessary, unfortunate penalties that that can come along with you. And, anything else optometrists need to know about this reporting requirement? I.
Ali:
So, just a couple of things. One is I'll also, give you a link, for anybody that wants, wants us to just kind of file it for them this year. I'll, I'll send you a link to just kind of put on the show notes if you want. And then, and then if anybody has any questions, they don't wanna do it, just go ahead and click on that. there are 23 exemptions though. where if you fit into any of these 23 exemptions, you don't actually have to report. we've gone through all 23 of those, and what we have gathered is that for optometrists around the country, there's only really one that. Would most likely apply. Right. And, because most of them are like, if you are a, you know, an exchange, like a securities exchange, if you're a bank, if you're a CPA firm, which, how funny that they put them in there. Right. so, you know, so you know, if, unless you're one of those or venture capital firm, you know, you don't have to report. But the only exemption that some optometrists might fall into is what's called the large operating company. Okay. The large operating company. And so there's, there's, there's a three factor test for the large operating company. And so the first factor is, is that you've gotta have 20 or more employees, full-time employees. Okay? and so, so that's, that's very important. The second is that you have to be operating or have a physical location in the United States. that's an easy one. I. For every, everyone who's listening. The third one is that you've gotta have$5 million or more of gross sales. Okay? So 20 or more full-time employees and be physically located in the United States and 5 million or more of gross receipts. Okay? Now there's a, there's a little nuanced here that I want you guys to know.'cause some of you have multiple offices, the 20 employee. Criteria has to be 20 employees per location. Okay? So if you have, let's say three offices, you need to have 20 in each. So if you have, not the average, but 20 or more in each. So if you have five in one and you know, 40 in another and 20 in another, only two of them would qualify. Right. so you just have to keep that in mind. the the revenue though, the$5 million can be aggregated, amongst the businesses. If there's a shell company or a kind of a, a, an umbrella company that is kind of where all the revenue is going to, and, and those are called sort of tax exempt companies where. You know, you know, the lower entities are disregarded, tax entities, everything kind of flows up to one. So in that situation it can be aggregated. so not a lot of OD practices will fall under, you know, a lot of you have 20 employees, but you may not fall under the$5 million, you know, revenue. So, so it's just something to keep in mind.
Evon:
Okay. That's, that's interesting. And it seems like a lot of the exemptions are, because these type of entities already report to the federal government in some way. you know, I, there's one, an exemption for certain investment advisor, advisory firms. So, it, it seems like that's the case. Is that the case with these large operating companies? What, what's sort of the, the reasoning behind that?
Ali:
Yeah. Yeah. No, I think, I think you hit it on the head. I think that's exactly right. I think it's because there's other mechanisms whereby they are reporting. Right. and so, so, You know, or maybe there's large enough where the, you know, the government's not worried about somebody, you know, doing some illicit work in, in those kinds of larger entities. I don't know. But, but the one that's excluded specifically that might apply to ODs, the only one really is this large operating company.
Evon:
Got it. It, it's interesting the, all of these entities report to states, right? So you are already reporting information to your, your state government, your state regulator, whatever it may be. unfortunately, you know, it might be different reporting in all these different states. Maybe the federal government doesn't get the information equally from all different states, so they're just adding another layer, so they're getting it directly. But, I, I really appreciate that. If you can send me the, the link you mentioned, Ali, we will throw that in the show notes and I'll put all of your contact information so anyone who is feeling overwhelmed with this, can reach out to you and I'll also throw in, as many links as I can about this topic in the show notes, but appreciate your time. This is, this is an important topic coming up, for this year's special deadlines for this year. So, this I think will be helpful and anyone that has questions can reach out.
Ali:
Sounds great. Yeah. Thank you.
Evon:
Alright, and for everyone else, appreciate you listening. We will catch you on the next episode and take care.