Main Street Business

#553 FinCEN BOI Emergency Appeal! What should you do next?

• Mark J Kohler and Mat Sorensen

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The department of justice has filed an emergency appeal to reverse the recent court ruling on the FinCEN Beneficial Ownership Information (BOI) requirement. In this episode, Mat breaks down what this appeal means for small business owners, the potential implications for compliance, and what steps you should consider taking in the meantime.  

If you’re a small business owner wondering whether you need to file a BOI or how this ruling impacts your LLC or corporation, this is a must-watch (or listen). Stay informed and ahead of the curve as this legal battle unfolds.  

Speaker 1:

Welcome to the Main Street Business Podcast with your distinguished hosts, mark J Kohler and Matt Sorenson. Both are best-selling authors and have over 25 years of industry experience, with 10,000 client consultations, making them the leading tax and legal experts in the nation. Together, they'll unpack the most complex tax, legal and financial strategies crucial for saving more, stressing less and building generational wealth. Today they're your personal advisors, ready to break it down for you and make the tax and legal game easier than ever. Here is Mark and.

Speaker 2:

Matt, welcome everyone to the Main Street Business Podcast. This is Matt Sorensen. Today I have a critical update for you on the BOI filing requirement to FinCEN. This is the thing you had to file that says who owns 25% or more or substantial control of your LLC or corporation. It was struck down as unconstitutional earlier in the month by a federal district court in Texas and now the federal government has appealed it in the Fifth Circuit Court of Appeals. So I want to update you on that, Please enjoy.

Speaker 2:

Well, the FinCEN BOI saga continues. The Department of Justice has filed an emergency appeal. They want to overturn the district court ruling in Texas that said you do not need to file a BOI for your LLC or corporation. Right now. The position of the federal government this is the Department of Justice is saying the law is constitutional and you do need to file a BOI by January 1st 2025 for any LLC or corporation you own. That is a reporting company under the law. Now if you've been following this case, you knew earlier this month, a federal district court in Texas said this law the Corporate Transparency Act that says you need to file a BOI for your LLC or corporation is unconstitutional and he ordered FinCEN to stop enforcing this and said that there was no liability for failure to comply with this BOI filing requirement. In other words, you don't need to file a BOI Now. That court order is still in place right now, but the federal government is trying to get it overturned by a federal court of appeals Now. The important update right now is the federal government has asked for an emergency hearing on this and they want a decision by December 27th, arguing that there needs to be enough time for people to comply by the January 1st 2025 deadline. Four days That'll give you four days to comply right now. Now I want to go over the next steps in the process. Here you can understand what's going to be happening and also answer the question what should you do, should you be filing this BOI or not and give you a couple of options that you could consider in your situation.

Speaker 2:

Now. The current administration, the Department of Justice hated this ruling. They are trying to overturn this to get this law back in effect so that you are required and you must file a BOI for your LLC or corporation. That's what their emergency appeal is all about. Now the Fifth Circuit will have to rule on this. This is a court of appeals before the US Supreme Court, and this could even go to the US Supreme Court next. That's the process here. The Fifth Circuit Court of Appeals could deny the request. They could grant it. They could grant it partially and say that the order can stay in place for the plaintiffs only, but everyone else still has to file. And what can happen after that? Well, the plaintiffs if they don't like the answer, they can appeal to the US Supreme Court. So this saga could be going on for a while. Now no one can tell you what the outcome is going to be here from this appellate case, whether US Supreme Court will hear it or not.

Speaker 2:

We also got some politics coming up here, a new administration coming in in January. Is the Trump administration and a department of governmental efficiency going to really push this? Because it's really small business who's fighting this right now and trying to get it overturned, saying it's waste of money and resources? Is it really going to capture any anti-money laundering or drug traffickers who are using LLCs and corporations improperly? Isn't there an easier way to do this rather than making every small business owner go and register with the federal government for their LLC? That's a decent argument and there's some constitutional grounds for it, and that's what this case is all about. So what you're in here is this big legal mess and court process. Welcome to the American legal system of where we're going through the appellate process. The case could overturn. The US Supreme Court could even overturn it again, and so this could be seesawing back and forth or it could just die out here. The new Trump administration might just let the case die out and let this Texas court ruling stand. There's other cases going on in the country where it's just plaintiffs involved, and there's orders in effect just for plaintiffs in those cases, but it doesn't affect everyone else. This Texas case is the critical one, though, because there's a court order from that district court, that federal judge, that says FinCEN cannot enforce this against anyone. They did what's called a facial challenge to the law that said the law is unconstitutional on its face as to everyone that the law could apply to, as opposed to just saying the law is unconstitutional as to the specific plaintiff in the case. That's why this Texas case is so critical, because the ruling affects everybody.

Speaker 2:

Now I've had a ton of questions from my clients, and even in our law firm and my corporate compliance business we're trying to decide what should we be doing for clients, and I think you have two options. Now. A lot of people have just said let's just play it safe and let's just go file a BOI. I can certainly understand that perspective and you may want to go there. You may want to not have to follow this or worry about it, just get it done. Maybe this says ruled unconstitutional and I didn't have to do it anyways. Maybe I just want to file and get it off my list. You could go that route and we've certainly had a lot of clients go that route Now. We filed thousands of BOIs for clients. I filed like 15 for my own companies because I had to. I was doing this earlier in the year when there was no legal basis for me not to file.

Speaker 2:

The difference right now is there is a federal court order saying you don't have to file, so it is totally reasonable. If you want to wait and see how this case goes, you can say I don't want to have to file this BOI. If you haven't filed one yet and you've been putting this off, or even you're setting up a new entity right now, you could say you know what? I just don't even want to file this BOI at all whether it's my new entity or a prior entity I've had for years because I don't think the federal government's entitled to this information. I'm going to wait and see how this case goes Now, if you're doing the wait and see approach, there's a caveat, and it's a big one You've got to be following to see what's going on in this case. If the Fifth Circuit overturns this, you might just have four days to file the BOI. Now I think the government's going to give you an extended 30, 60-day period to still file. They're not going to be enforcing this immediately. If this case does get overturned, this could also still go to the US Supreme Court. You could also have a Department of Justice that comes in or the Trump administration who knows what they're going to do with it. So it's not going to be settled immediately and forever, even if the Fifth Circuit overturns the Texas District Court.

Speaker 2:

Now I want to talk about the BOI and what the heck it is and how you do file it if you haven't done it yet. Now you go to FinCENgov slash BOI and this is where you actually file the BOI. Now, if you have an LLC or corporation that conducts business in the US, you area reporting company under the law. Now there's a couple exceptions to a reporting company where you don't have to file. Like you have an entity that you set up before 2020 that's not even active anymore there's an inactive exemption. You don't need to file a BOI for that. Another common exception we see is the large company exception, which says if you have more than 5 million in revenue and more than 20 employees, you don't need to file a BOI because you're a large company and you file a company tax return and payroll reports to the IRS, where they're kind of like we know who you are. So there's this large company exception. But a lot of small businesses don't have 5 million in revenue and 20 employees. They can't rely on this exception. So the burden has really been on a lot of small business owners and self-employed people who are the ones that have to file this BOI. All the big companies don't have to file this. Have to file this BOI. All the big companies don't have to file this. So the burden is on you, small business owner, to file this BOI. Now there is no fee to FinCEN to file it. You could hire a lawyer or CPA or corporate service company to do it for you, but you could also do it on your own. There is no federal government fee to file this.

Speaker 2:

Now, the filing is supposed to be private and confidential. The federal government cannot disseminate that information. There's no publicly searchable database for the BOI, but what goes on? The BOI is the name of the company, the EIN number for the company, and anyone who owns 25% or more must be disclosed their individual name and address, and anyone who has substantial control of the company. This could be like manager of the LLC or president of the corporation, and this could just be you. You own the company 100% and you're the manager of the LLC. Well, you would just be the one person listed on the BOI and it's pretty simple to file.

Speaker 2:

Now, the one big snag and the pain point a lot of people have had in filing this is you do need to upload a government issued ID of anyone that has 25% or more ownership or has substantial control. This could be a driver's license, a passport. You do need to upload a photocopy of this government issued ID. Now you could do the BOI filing in 10 to 15 minutes. It's not that complicated, it's not like a tax return, but you do need to have some of that information on hand to file this. If you decide you want to just file this and get it off the list and voluntarily submit Because, again, right now you don't have to file, given the federal court order in Texas which is still in place but if you don't like the wait and see approach, you can just file and get it done with and we're doing that with a lot of clients right now. Otherwise, you need to be tracking this to see what the Fifth Circuit does. Is the Trump administration going to push this? What's the US Supreme Court going to be doing? I'm, of course, fascinated by this case and definitely be following and updating you here on our podcast and on my YouTube channel, so make sure you're subscribed and following here on YouTube. Also on the podcast, we're going to be updating you there.

Speaker 2:

Reach out to your professionals, your attorney, your corporate services company, your CPA, whoever you professionals your attorney, your corporate services company, your CPA, wherever you get professional services and advice from, to get their opinion on this and whether you should file. There's a lot of differences of opinion by professionals and I would say most lawyers, cpas, who are very risk adverse, are just like just file it, just file it and be done with it, and I get that. I can understand that approach and some of you may feel like that I just don't want to have to worry about it. But also some of you might feel like, eh, this is none of the federal government's business. Why would I have to do this? I already have an EIN with them.

Speaker 2:

I filed this with the state and I obtained this. Why is this requirement applying to me? Small business as to file this to the federal government. I want to just track and see how this case. Please make sure you're subscribed and following, because these updates are critical in this case, but I'm also giving a lot of tips on how to save taxes, protect your assets and build wealth. I'm Matt Sorensen. We'll see you next time.

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