In episode 31 of The Real Talk, Raquel Ramirez interviews Lawrence Lambert, a seasoned business attorney, to discuss the implications of the Corporate Transparency Act on small businesses. Lawrence shares valuable insights on the Act, its requirements, and the importance of legal protection for businesses.
Tune in to gain valuable knowledge about the legal aspects of entrepreneurship and small business operations.
TIMESTAMPS
[00:02:27] Evolving Legal Career.
[00:06:08] Tired of Fighting
[00:10:58] Drafting Business Documents for Couples.
[00:15:17] Small Business Regulations.
[00:22:46] Shell Companies and Anonymity.
[00:26:21] Beneficial Ownership
[00:31:30] Reporting Beneficial Owner Information.
[00:36:29] Business Formation and Compliance.
[00:42:03] Starting a New Business.
[00:46:42] Litigation Mitigation.
[00:49:33] Setting Up Business Prenups.
In this episode, Raquel Ramirez and Lawrence Lambert shed light on the importance of adhering to the Corporate Transparency Act which is crucial for small businesses to avoid penalties and ensure transparency in ownership.
Overall, the insights shared by Raquel and Lawrence underscore the value of seeking legal assistance when starting a business. By working with a knowledgeable attorney like Lawrence Lambert, small business owners can navigate legal complexities, stay compliant with regulations, and protect their business interests effectively.
QUOTES
SOCIAL MEDIA LINKS
Raquel Ramirez
Instagram: https://www.instagram.com/featured_properties_intl/
Facebook: https://www.facebook.com/featuredre
LinkedIn: https://www.linkedin.com/in/raquel-ramirez/
Lawrence Lambert
LinkedIn: https://www.linkedin.com/in/lbllawpa/
WEBSITES:
The Real Talk: https://www.therealtalkpodcast.net/
Featured Properties International: https://msha.ke/featuredre
Law Office of Lawrence Lambert: https://llambertlaw.com/
Welcome to The Real Talk. I'm Raquel Ramirez, your host and real estate professional here to bring you insightful conversations, expert advice, and powerful stories about what really goes on in life, love, divorce, and real estate. Are you ready? Let's get real. Hello and welcome to The Real Talk podcast. How are you doing today?
I'm doing terrific, Raquel. It's great to be here.
I'm so glad to have you, Lawrence. For those of you who are tuning in today, I am speaking with Lawrence Lambert. He is a friend and he's a business attorney. I have the pleasure of networking with him almost on a weekly basis. And I've learned a lot from you actually, because I know that you deal with a lot of small businesses, which by the way, I presume are is the bulk of the businesses that we have in our world, right? Most of them are small businesses, small mom and pops or medium sized businesses. The big conglomerates are kind of the few and far in between. And while you help a lot of those people who are entrepreneurs or small business owners, and I know that something came up recently, which is what we're going to talk mostly about today. But before we get into that, I'd really love for you to tell us a little bit about who you are and what it is that you actually do, as opposed to just me saying. You're a business attorney.
Well, thanks, Raquel. It's always fun to talk about myself. Of course. I try not to do that too much, but I'm happy to share some information here. So my name is Lawrence Lambert. I'm an attorney. I am a licensed attorney here in the state of Florida. I've been practicing in Florida for almost 30 years. So I passed the bar and became a member of the Florida Bar in 1994. And I've been practicing pretty much nonstop ever since. And I started my career doing exclusively complex business litigation, which is essentially lawsuits, arbitrations between big companies. other big companies or between individuals and big companies, things that are complicated, class actions, things like that. After about 15 years of that, I started to get a little antsy working at big firms and some boutique firms and decided I wanted to be the master of my domain and went out on my own and started my own solo law practice. And then at that time, I also decided to expand. And in addition to doing the litigation, I also started doing corporate transactions work because, you know, I've been litigating these complicated contracts, you know, for 15 years. And you start to see sort of some patterns and things where. Right. Where are the friction points? What's causing people to end up in litigation? Right. And I know what I've got a business background. I went to the University of Virginia. I got a bachelor of science and commerce in business. I've worked with businesses as an attorney. I think I can probably do as good a job as these people who are litigating these contracts and drafting the contract. So I started doing that corporate transactional work to help people hopefully avoid litigation, which in today's world is exceedingly expensive. And I can imagine it can be very difficult to predict what's going to happen in litigation. So I'd like to help businesses have more predictability, more understanding of what their transactions look like, helping them draft them so that they can avoid those disputes. And if they have disputes, which you can't always avoid, at least hoping to minimize the expense that they incur in fighting over those disputes. So so I started doing that when I went out on my own. And then a couple of years ago, I decided to do just the transactional work. So now I'm doing exclusively business actions. I find it to be much more satisfying. I bet. Yeah. And personally, because people actually appreciate the work you do as a litigator. Many times all you get are complaints because nobody wants to be in a lawsuit and nobody likes to have to pay the bills for lawsuits. And so. Right. much more appreciative of the corporate transaction work. So I do that now exclusively, and that includes helping forming new businesses, helping entrepreneurs buy or sell existing businesses, and drafting pretty much any kind of transactional contract that a business may need, whether it's with a vendor or customer or employees, you name it, I probably have drafted it.
That's awesome. That's interesting. You pointed something out or sort of alluded to it, which is that probably that you were kind of tired of fighting, right? And I get that a lot in family law, which is why a lot of people are migrating from family litigation into collaborative because people are just tired of going to court and fighting. and tearing each other apart. So that's really interesting. And then it seems like you went full circle, right? Because you are indeed an entrepreneur, you own your own business, you own your own practice, and you have a lot of experience looking from the other side, what things to use, I guess, to incorporate into your operating agreements and things like that, to avoid what you said, litigation and costly disputes. So really interesting.
Really, really interesting. I find it. I find it interesting. You know, when you talk about tired of fighting, I wouldn't say I was so much tired of fighting. That's what I what I did. You know, I was trained to do it and I did it. What I got tired of was the failure of people to avoid fighting when they could avoid it. Yeah. And ending up in these battles in court that would drag on for years. And as much as I found it interesting, many times it's fascinating. The issues you have to deal with are really interesting. Frankly, the most fun I've had as a lawyer is, you know, being in a trial or. going to court and arguing a complicated motion with a lot of complicated legal issues. That stuff for lawyers is fantastic, but for the clients, not so much, right? So that's what I kind of got tired of was, I started to see the lack of efficiency in the litigation process. And I was tired of battling that aspect. when I thought I could do a good job of helping people avoid it by better, more careful drafting of the contracts.
Yeah.
Yeah. So, yeah, I mean, I do sometimes I do miss the litigation aspect, but overall, I'd say the transactional stuff is just, you know, way more satisfying, both personally and professionally.
Well, yeah, it's kind of like, and I'm gonna draw some similarities here. When we work in the divorce niche, for instance, I tell people, I obviously specialize in divorce cases, but I don't work exclusively with divorce cases. Of course, I would love the happy couple that is about to get married. They're looking forward, they are optimistic, they're happy, and closing that transaction is a joy. Whereas when you're working with a divorce case, there is some form of fulfillment there because of course you're helping a couple get past a very difficult time in their lives, but they're looking backwards and it can be a very stressful, it could dampen people's spirits sometimes. And yeah, so it's kind of in that sense, I would see that. Yeah, you could absolutely draw some similarities there. Now, When it comes to small businesses, I realized this is the kind of service that every small business can benefit from because most small businesses start as an idea in somebody's bedroom and somebody's, I don't know, garage or someone's home office and someone's kitchen and someone's car. And then they are scrambling to put these ideas together in a way that will help them generate some form of income. And before you know it, you've got this operation flowing and you've got absolutely nothing in place to safeguard your assets and all your hard work or anything like that. So this is something that is actually really, really important. And I'm sure you've saved a lot of businesses from some nasty headaches down the road.
Yeah, I'd like to think that, you know, it's it's interesting because you don't always know the effect you're having when you're doing this work, because, you know, when you avoid a problem, the problem never comes up. So you don't know if you actually avoided it. So you just know that the process that you help people with is a process that has a purpose and that it's beneficial to them, even if they Challenge never arises, even if no dispute ever arises. They're in a better position if you take the steps at the beginning to set your business up properly from a legal perspective. A lot of people don't. It's very simple in Florida and many states to form a business. You don't have to be a lawyer to form a business. You can go online on sunbiz.org. A lot of people know what that is. If you don't, that's the state of Florida's Division of Corporations website. And you can go there and you can form a corporation in about 20 minutes if you have the right information. You can fill it out online and submit it, and you'll get a response back depending on how backlogged the State Department is, you know, within a few days to a week. And there you go, you've got a corporation or an LLC. But that formation process is the most basic method of forming, and it doesn't, do everything that small business owners really should be doing to protect themselves, particularly if they have more than one owner of the company. If the company is going to have a lot of assets, really want to protect those things. There's a lot more that you really should consider. And that's where a lawyer comes in and can be really helpful in that process. But a lot of people just don't want to deal with it. They don't want a lawyer. They say, I'll go online, I'll do it myself. And then they'll come to me, you know, six months later or a year later and say, oh, I'm having this issue. Can you help me? And at that point, yes, many times I can help, but it can be more expensive. And sometimes, you know, if you're already in a dispute with your partner, you may end up in that litigation that you were hoping to avoid that I could have helped to avoid if you did it from the beginning.
Yeah, I just thought of something, and this is actually something I've never asked you before. And it's obviously off topic regarding the Corporate Transparency Act. But when it comes to a couple, a married couple that is opening up a business for the first time, is there a way to draft those documents in case of, say, a marital dispute or breakup in the future? Because, of course, we have We have prenuptial agreements, obviously, for different assets and things like that. But is there a way to draft a document for business ownership that will protect either party in case of a dissolution of marriage?
Yes, there are ways to do that. There are certain provisions that I will include in a in a spousal business ownership arrangement. Is it foolproof? Probably not because obviously once you're in a dissolution marriage dissolution proceeding, you know, anything can happen. But there are things you can do. I would say, though, that. One of the benefits of having a lawyer help with a marital business is you can do things to help protect the business assets from creditors by having certain ownership rights in the business be considered as owned by tenancy by the entireties, things like that, that protect your real estate when you're married. You can also do with businesses in certain circumstances. So there are some things that we can do that are helpful for married couples when they are also business partners.
Awesome. So this is definitely a topic I'm going to revisit with you in the future because it's something I hadn't thought of up until this point. Obviously, I don't sell businesses and I don't get involved in those things, but it's a topic of interest for me for sure. So then let's move on. Now, let's talk about what we came here to talk about, which is the Corporate Transparency Act. This is something that's relatively new and it's something that affects us all, I think. And maybe it's not new. It's definitely new to me.
It's very new. And it affects a tremendous number of people who are. Least likely prepared for addressing, and I'll get into that when we start, but yes. So go ahead with your intro and then we can get into the nitty gritty.
Yeah, of course. So actually, let's start at the very beginning. What is the Corporate Transparency Act? And I guess, when did it take effect? How soon? How long ago?
Yeah, so the Corporate Transparency Act itself has been in place for a couple of years. But what what's new is the regulations that were put in place by the Treasury Department. And just to back up, the Corporate Transparency Act is a federal statute, which means it was passed by Congress, signed by the president and became law at the federal level. It's not a state issue or a local issue. It's a federal issue. So it applies across the country. And the purpose of the statute was to help fight money laundering, terrorist financing, nefarious crime syndicates using corporations to commit crimes, stealing money, wire transfer, theft, you know, all the things particularly in real estate that, you know, real estate lawyers and real estate brokers and agency all the time, which is you know, creating fake companies to steal money from unsuspecting people. So the government decided, you know, this was a gap in the in the protections that we need for identifying bad actors. And so this Corporate Transparency Act requires disclosure of information about, you know, corporate entities. to allow the government to identify when, you know, there's criminals involved in a particular corporation. So what changed recently was effective as of January one of this year. The Treasury Department's what's called the Financial Crimes Enforcement Network, which people may have heard of called FinCEN, F-I-N-C-E-N. Mm hmm. added some new regulations that took effect January one, which required small businesses, mostly small businesses, to now file with the Treasury Department, with FinCEN, a report identifying their beneficial owners. OK. And the purpose of this is to close that gap because, you know, I think in the in the rulemaking that was published, The Treasury Department identified, you know, an estimate of about two million businesses being formed every year in the United States. Oh, my gosh. So it's like you said at the very beginning, small businesses are really the backbone of the country. You know, we hear in the news about you know, these huge corporations, the, you know, the Googles, the Intels, the- Amazons, yeah. The banks, the Amazons, all these huge corporations. But the real backbone and driver of much of our economy is small businesses. And so people form businesses constantly. And so this was a real gap in reporting. And so the treasury department decided, look, we're gonna try to drill down on that a bit to avoid people forming these shell companies to be used for criminal purposes. And so now every small business in the United States that currently exists or is formed going forward has to file this report with with the Department of Treasury.
And are there exceptions to the absolutely every type of business?
Well, there are exceptions. Most of the exceptions are not going to apply to most small businesses. So I can't go through every exception. We'll be here all day, but there are 23 of them and you can read them. on the website and website, you can if you want, you can read the full list. And if you're each one of them, sometimes reading subsets, it's not like reading. It's very complicated. But in a nutshell, the CliffsNotes version is that the exceptions apply mostly to. big companies or entities that are already required to disclose this information. So, for instance, banks, insurance companies, broker dealers, securities broker dealers, people who already are filing information with other regulatory agencies so they know who the beneficial owners are, they're exempt from this. Now, the one Exemption that can apply to a small business is what's called the large operating company exception. And that exception applies. You have to meet certain requirements for the size of your business. I think there are three requirements. You have to have at least 20 full time employees. You have to have at least five million dollars in gross revenue annually. And you have to have a physical presence in the United States where your business operates. And if you meet those three requirements, then that you can there may be an exemption for your compliance with this with this regulation. But. That's not most I think, again, in the in the publications that they sent out, the government estimated there's about three hundred and sixty or three hundred and seventy thousand businesses that would likely qualify for that exception in the United States, which sounds like a lot until you see the other number, which is the two million businesses formed every year, every year. So yeah, it's crazy how many small businesses are formed. Most don't succeed. Some get formed and never get used. By the way, if you form a company and it's not doing any business at all, it's just a non-operating entity that just sort of sits on the books somewhere, that also you don't have to file. It's an exemption if it's a completely non-operating entity. OK, as soon as you start using it, you got to file. Yeah, it's just just form the enemy and you never used it. It has no bank account or whatnot. You're you're probably OK without filing something. But the vast majority of small businesses are gonna be subject to this. And it doesn't matter if you're a corporation, if you're an LLC, if you're a limited liability partnership, an LLP, any corporate or business entity that is created by filing something with a state entity for its authorization to exist, you have to file this, what's called the Beneficial Owner Information Report. So it's pretty broad. In real estate, it's easy to not know about it and easy to not comply with it because many people today are buying real estate as investments.
I was just about to say that. Yeah, they open up just an LLC. I mean, banks do this for, they actually open an entity or used to at least open a separate entity for every property they took back.
That's right. Yes, that's correct.
Because there's a liability factor there, obviously.
Correct. So, for instance, if you have a client that, you know, they own their home, not retirement age yet, but they're looking to diversify some investments. And they see this great opportunity for, you know, hey, let's let's buy a condo or a property for running as an Airbnb. We'll list it and we'll rent it out. So they form an entity, which is essential for your own liability protection. You form an LLC by that entity or by that property, and then you start listing it on Airbnb and whatnot. that small entity is gonna have to file this beneficial owner information report. And all it does is own one piece of property that maybe generates $30,000 in revenue every year, have to comply with this new requirement.
But I would assume that those are probably the most likely to turn out to be shell companies that do exactly what we're trying to avoid, right? Which is to launder money or something like that. A lot of people open shell companies just as a facade. So I'm assuming that it doesn't matter how small it is, that you still have to identify yourself and say, I'm not that.
Well, interesting. You don't have to actually say you're not that, you just have to identify yourself. Right.
Identify yourself.
Right. It's hard to say what types of entities are the most commonly used for criminal practices. It can be anything. I mean, that's that's the trick. And, you know, sometimes they'll form shell company on top of shell company. So, yeah, form one company, then you'll have that company form another company and then you'll have that company you know, form a third company. So now you're three levels down from the original company. And in your filings, you don't have to identify any individual member. So when you register to form a new corporation, for instance, you're not required to identify the shareholders. You know, when you when you file for a new limited liability company, you're not required to identify all the members. You just have to identify if you have a manager, for instance, you just identify the manager, you have a registered agent, you have a principal place of business, which has to be a mailing address. But you know what you can use? you know, any number of ways of identifying a mailing address that's sort of like a shell or not a real place or not a real place business. And so, you know, the purpose of this reporting requirement is to drill down to the very bottom of who are the individuals that are the beneficial owners. You can't just identify a company as a beneficial owner. You have to drill it all the way down when you're- Until the last common denominator. The last common denominator so that you can't hide your interest.
Okay, so then what kind of information are they asking for? Like obviously names, I'm sure, but is there anything more specific? Are they asking for social security numbers? Does it matter if you're a foreign owner?
So yes, this rule applies to both foreign and domestic entities and owners. So if you're a foreign company and you're registered to do business in the United States, You have to comply. Right. And so the information that's required, it's it's not complicated information. It's basically your name, your address, your you have to provide. This is the part that most people are going to get upset when they hear this, but you actually have to submit an upload. a copy of either a driver's license or passport, something that proves you are who you say you are. Right. And so, you know, people, I think, get a little itchy when you have to submit something like that to the government. They have a copy of that. Yeah. What I will tell you is the government already has it. You have a driver's license. It's a government issued ID. So the government has your driver's license already. Yeah. So submitting it to another government agency Yes, I understand why people get antsy about it. But the fact is the government already has.
So I know what I just a quick sidebar. I think that's funny because, you know, with with social media now, it's you can't even say anything in your living room without turning on the TV or opening up your phone and seeing YouTube or some other search engine popping up something that you were just talking about. So if you're worried about the government having your driver's license, I'd say you're probably worried about the wrong thing. But I digress.
Yeah. So, so yeah. So, so it's like I said, so your name, your date of birth, your residential address, not a business address, your driver's license number. And then, like I said, a copy of the driver's license. If you're a foreign, a foreign, you know, not a citizen of the US, you're just a foreign owner, then you have to submit your foreign passport. So it's, it's not personal. It is very personal. It's not something that is going to be available for the general public to review just for the internal FinCEN review to make sure that people aren't using their businesses for criminal activities. Activity. Yeah. So this is good.
There isn't going to be a list that's published and said, hey, by the way, all these companies exist. These are the people that's just for internal purposes.
That's correct. Now, now you may there may be some sort of summarized data that gets published in terms of number of businesses, where they are, things like that. But I don't think there's any plan to publish down to the individual owner information in a public way.
Is there a cost?
There's no cost. But the tricky part here that will apply to some businesses is identifying who is a beneficial owner. That issue is not, I wouldn't say it's complicated. The more complicated your business structure, the more complicated the question is. Right. So I'll give you the simple low-hanging fruit first. If you're an individual and you form an entity to buy a piece of real estate, let's say you form an LLC, you're the sole owner and you're the sole operator of the business, that's it, it's just you. You're the only person that you have to disclose. Once you start having multiple owners, then you have to start looking at the definition of who is a beneficial owner, because there's two components to it. You either exercise substantial control over the company or you own or control at least 25% of the ownership interests of the company. So let's say you're a corporation, you have four shareholders, you and three of your friends decide to form this company, you each earn 25%. Each of you is a beneficial owner. So that means you'd have to identify all four shareholders information when you file your report. Now, that's not necessarily the end of it. Let's say you and your three friends form a company, but three of you are just passive investors. You still have to disclose because you own 25%, but let's say you hire a third party to be your CEO or president. to basically run the business. Well, that's substantial control. So determining who has substantial control over a business in most cases is pretty straightforward. It's basically your senior officers, your president, your CFO, general counsel, if you have one, CEO, chief executive officer, COO, chief operating officer. Those are gonna be the people who have substantial control. And so you'd have to identify all of those. So if you're a company and you have a full slate of officers who exercise the actual control over the operation of the business, those people have to be identified as well. So the more structure your business has, the more likelihood that you'll have multiple people that have to be disclosed as beneficial owners. I'm sure that's gonna- That's where help from an attorney- From an attorney, right. I'm saying is determining who has to register.
Who has to register, right. Now, is there a penalty, let's say, for maybe somebody who accidentally missed listing somebody who's on the roster?
That's a great question. Yes. Well, let's first talk about when you have to comply because the penalty is to comply. So you fail to comply. And then, so what is that? So if you're an entity that existed before January 1 of 2024, you have until the end of this year, so December 31, 2024, to file your beneficial owner information report. So there is time, but as I say to most of my clients, just because there's time doesn't mean you should sit on your hands and wait till the last minute. So I would still suggest anybody who's needs to file, if it's as simple as just a single member LLC or a single shareholder company with no officers and directors, just you can do it yourself. You don't need a lawyer to file the report, but just get it done. And so you can put it behind you and not have to worry about it. For new companies that are formed starting on January 1, 2024, you have 90 days from the date that your company is recognized as having been formed, which means the date when the State Department of Corporations of whatever state you've formed your company in sends you that confirmation that you have been legally formed and now exist. So I would say, you know, the best bet for most small companies, again, if it's just a single owner, as soon as you get that confirmation, you know, most people, when they get that, the first thing they do is they go to the IRS website and they get a tax ID number. Right. The tax ID number to open a bank account. Right. Well, when you're doing that, Go to the FinCEN website right after you get your tax ID number and just file your beneficial owner information report. Just consider it part of your immediate initial formation obligations when you set up that new entity. It's not complicated to do it, but it's easy to forget, right?
No, I agree. I actually, believe it or not, I've actually written that on my to-do list like six or seven times over because I keep pushing it back. But now question is, is this something that you have to report every year? I'm assuming you have to report an update if you've changed the ownership structure of your company. But is this something that you have to do anyway on a yearly basis?
No, once you do it, it's done as long as there's no changes. So like you said, if you change your owner, so if you sell your business, that new business owner needs to now file a new report identifying the new owners. If you add a new shareholder that owns 25 percent of the company, you have to file an amended report with that new information. And same if you change your officers.
Right.
You fire your president, get a higher fire president, hire a new one. You've got to change it and add the right president. Right. So going back to your original question of penalties.
Yes.
Yes, there are penalties and the penalties can be a fine of up to five hundred dollars per day. Oh, wow.
That's a per diem rate.
A per diem rate now. Is is the Department of Treasury going to immediately start imposing $500 a day penalties in the first year or two of this? I don't know. Right. We won't know until they start are doing it. You know, the other question is, how are they going to know who's who is going to be verifying that these millions of new companies that are formed every year are actually complying? How how is the Is the Treasury Department gonna determine that when an entity is formed and whether or not that entity is filed? Those are all questions that we don't know the answer to yet because it's so new. But once they figure that out, and if they figure it out quickly, it could happen quickly, they will start imposing the funds. So like I said, whether it has to be $500 per day, again, I don't know the details of how they determine how much of the fine, but it's it's up to $500 per day for noncompliance. So, you know, these are why take the chance. Right. Yeah. Let's get it done. It's not that complicated to do it if you're a small entity and you have easily identifiable beneficial owners. Right. Just get it done.
Yeah, for companies like mine, yeah, I'm the sole beneficiary owner.
Yeah, for me too. For my company, I'm the only owner of my law firm. I went on immediately and I did it, and it took about five to 10 minutes just to go through the process.
I was just about to ask that. Yeah, okay, so five to 10 minutes.
If you're just identifying one or two beneficial owners, it just takes a few minutes to do it and you'll get a confirmation and save that, save the confirmation, because if you're doing it online, the only confirmation you're going to get is electronic. Got it. So make sure you save it.
Save it. OK. What about for companies who have, say, because I do know a number of people who have small businesses like the one I do, but then they have, say, an attorney who's their registered agent and that appears, say, on SunBiz.org, you'll see their manager is themselves, their president is themselves, but then they have a different registered agent. Is that person considered some form of beneficial owner?
No, not that has been disclosed or identified. A registered agent generally doesn't exercise substantial control over the business. They're just basically a drop box. Right. Or receiving official. communications that are sent to the company. So if you get if the company is sued, you can serve the complaint on the registered agent. But the registered agent has no real authority to operate or manage or control the business. However, you do bring up a good point about lawyers. If you are a lawyer and you are representing a company and filing the report, you have to identify yourself. So the lawyer that helps form a new entity, when you file that beneficial owner's report, you have to identify the lawyer as the person who assisted in the formation of the company. So so what I did was I do hope to help businesses that need help with this. I actually registered with FinCEN as a you know, as as a lawyer who's going to be doing this kind of work that way, it sort of streamlines the process for me. I just enter my registration number and then it pulls me up right away. So. Oh, I see. OK. It allows it allows what's called a FinCEN ID. And if you are an individual who is. forming tons of businesses, particularly if you're investing in real estate and you buy and sell multiple real estate investments every year, you can register as well. You don't have to be a lawyer to register, but it helps to streamline the process.
Interesting. Interesting. OK, now this may be a silly question, but I presume that most of these companies are much larger. But does this have any effect whatsoever on publicly traded companies?
No, publicly traded companies are exempt from this because they already have to identify everything and everyone through, you know, SEC filing. So if anybody's ever gone to the SEC, Edgar filing portal, you find their, you know, annual reports, quarterly reports, you know, 10 Ks, you know, 10 Qs, all that stuff that, It has to be filed regularly. It identifies your directors, your officers. Most public companies don't have owners that are 25% or more, but if they did, I think they have to disclose that as well. So it's already known.
So that is one of the examples. How many of these, I mean, has this, since the law has been in effect, have you seen maybe an uptick in your own business with the amount of work that you're doing to help people report? Has that been one of the-
It's interesting you ask because I have been putting information out there for people to prepare. And I'm sure many of your listeners and viewers have received emails from their own attorneys or have seen things on LinkedIn or, you know, in any number of, you know, networking sites, lots of people are promoting this.
Yeah.
I personally have not yet had the huge uptick of business that I expected. I think that's because people put their head in the sand. The deadline isn't for another 10 months. So they're not really thinking about it right now. But come December 15th, December, I expect I will be inundated with clients saying, hey, what's up with this? Do I have to do this? Yes. You've had to do that for a year. And I'm leaving on vacation tomorrow. So, right.
That's always how it works.
Right. So where I think it's more likely I will see the uptick is when I'm helping people form a new business. Starting now, you have to file this report within 90 days. So I expect it's just part of the business formation process. Now, you have to just do it as soon as the business is recognized by your state and corporation. You just file that report and. You know, that's where I expect to see more of this work. It's just part of the normal business of forming businesses. For existing businesses, their heads are in the sand right now. I would say, take your head out of the sand, fold it and just do it. Don't wait. There's no reason to wait. It's not complicated. Yeah, and it's not going to cost you anything. It doesn't cost anything to do it. And if you do have a more complex business structure, call an attorney and they can help you do it. It's even with that complicated.
Yeah, get it out of the way. It's something so simple. Yeah, just get it out of the way. So for people who are listening, the website you want to go to is www.fincen.gov forward slash BOI. I'll spell that out. It's www.F as in Frank, I, N as in Nancy, C, E, N as in Nancy.gov forward slash B as in boy, O-I, vincenn.gov, four slash B-O-I. And of course, I encourage you to reach out to say your attorney or to reach out to Lawrence Lambert. You can always actually find him on his website too, which if I'm not mistaken, it's www.llambert.com. law.com, that's L Lambert, L-A-M-B as in boy, E-R-T, law.com. I will put that in the comments section for everybody to look at it and to be able to find it easily. This was very interesting and I'm curious if there's anything else that you might want to share when it comes to your line of work and helping businesses get off the ground with their operating agreements and anything else. I know that for me personally, you've helped me draft some agreements that I've needed to put in place to protect my agents when they're out. Namely, there was one that was regarding tenancy, because there is a lot of issues that my agents run into, specifically the ones that are helping teachers relocate through Teach for America. We've run into a lot of landlords that want to use their own version of a lease. And those leases are almost always lacking. I have no idea why they just won't use the Florida Bar lease that has been approved. But nevertheless, they hold us you know, between a rock and a hard place, because they basically say, I will not rent this out to you if you don't sign this lease. And so it's a great place, it's a great price. And so we're, we were faced with that situation. And so I reached out to you to help me with a form to make sure that our tenants who we were representing, were fully aware that this wasn't a lease that we stood by that that they had every responsibility to read that lease and to maybe seek legal counsel if they needed an interpretation of it. So that's just one example of something that I know that you've done for me and for others that I know in the past. Is there anything else, any other service that you think would be important to tell others about?
Well, you know, if if you're a business owner and you're forming a new business, you know, the best suggestion I can give you is, you know, don't just file the minimum documents with the state to form your entity. If you are more than one owner of the company, it's really important to have a shareholders agreement. Yeah. If you're forming a corporation or an operating agreement, if you're forming an LLC, Florida recognizes those agreements as binding and enforceable. And it allows you to essentially control your own fate so that when you set up your business, you can clearly establish who's responsible for what. And what happens if, for instance, and you asked about in divorce, well, you know, one thing that happens when you have a divorce of a married couple, it often can lead to problems with you know, businesses that either of those spouses own and address those issues through an operating agreement or a shareholders agreement to ensure that there's a smooth management of those ownership interests through the divorce proceeding. You know, these are these are things people don't always think about when they're starting a company because they're so happy and right. They make a million dollars. We're going to be the next Google. Right. And I guarantee you, the first Google didn't start by, you know, filing an article from Corporation with the state of California and then doing business. They had helped forming that business to make sure that there were protections in place. to ensure a smooth ownership. And the other part is also a smooth transfer of interest so that if somebody wants to sell the business, their interest in the business, there's a mechanism for that. If somebody dies or no longer wants to participate in management, there are all kinds of things that happen in businesses that you can avoid. Again, it goes back to avoiding disputes. If you clearly state what happens under these circumstances that are foreseeable, in your agreements, in your operating agreement, your shareholder agreement, it can minimize the risk of ending up in court later. So that's my primary suggestion. The other thing is if you're interested in seeing issues that affect small businesses, I do also write a column once a month in the It'll be in the Pinecrest Tribune and the Palmetto Bay Villager. I love it. Newspapers. It's called the Business Law Beat. It comes out once a month. It differs which week it is, but you can find it. So the last one that I wrote, which was the February 12th. to 25th edition of the Pinecrest Tribune was all about the Corporate Transparency Act and the beneficial ownership and information reporting. So you can read there. You know, more often. So so there's something interesting every month. Hopefully that'll be interesting anyway. And if it is interesting, please let me know. If it's not interesting, let me know, too. So I'll try to make it more interesting.
Yeah, feedback is good, feedback is good. And I love that you mentioned that about the small businesses. I know that a lot of people, I think, try to cut a lot of corners, but then they hate themselves for doing it because it's just one of those things. Look, it's better to safeguard yourself and prevent issues. It's like I was mentioning to somebody the other day, what was it that we were talking about? I don't remember what the subject matter was, but I said, it's like the day that you take your umbrella out, right? And you almost do it because you take it. to make sure it doesn't rain. Because if you don't take your umbrella, it will rain that day. That's just how it works. It's Murphy's law or something. You know what I mean? So protect yourself. And it's, it's, as you mentioned earlier in the, in the conversation, you know, that you don't really know, right. It's kind of hard to justify this process because you don't know what it's really doing. Right. Because If it's doing its job, then nothing really happens. If it does what it's meant to do, which is to safeguard you and protect you and minimize your risk, then I guess you'll never really know. And maybe if it does a good job, then you'll never really know. But you will know one thing for sure. If you don't safeguard yourself and you don't minimize your risk or put those things in place to help you, then when the going gets tough, you'll know for sure how bad it could be.
Yeah, yeah, I call it well, I have two two things that I compare what I do to other things that make it sometimes more easier for people to understand. One is I I call what I do litigation mitigation. I like it. What I do to help mitigate the risk of of litigation. You can't avoid it in all circumstances. Right. It's a part of life. And if you have a business that you may face a dispute that goes to litigation, but it can what I do can help mitigate the risk and hopefully mitigate the expense if you do end up in litigation by making it easier to resolve the dispute, because there's clear terms and conditions in your contracts. Yeah. The second thing I compare it to is more along the lines of what you're talking about with the umbrella. It's it's sort of like legal insurance. You know, we're not paying you're not paying a premium in order to get paid some recovery under a policy. But what we do is we provide certain protection against risks down the road, similar to insurance. So, you know, every year you pay your insurance premium and you don't have a car accident. You don't need it, but you have to have it in case. So it's similar to what I do is I try to help. Create legal structures and documents for businesses, small businesses that protects them against the risk of of problems that may arise. Those problems may never arise. Yeah, but the risk is there. So it's better to protect yourself than not. And unlike insurance, you don't have to pay a premium every year, right? As you've done it, as changes occur, you may need to update things periodically, but it's not like every year you have to mandatorily renew your premium payment.
Yeah, exactly. So it's like a prenup and a seat belt, all in one for your business.
Yes, that's the way you put it. I may use that.
You see, you're welcome.
Yes, thank you.
It's a prenup and a seatbelt for your business people. So make sure that you pay attention to what you need to do. Get your registration with the Corporate Transparency Act. Get that out of the way. Make sure that you're falling in line. You don't want to be fined $500 a day for Lord knows how long, because you know how that works. Then you finally get the bill in the mail. You're like, I owe $337,000. How's that possible? And then you realize it's been like six years since you did what you had to do. But anyway, I thank you very much for joining me today. This was a very insightful podcast. I hope that anybody who's out there, whether they own a business or not, they take note of it because somewhere along the line, somebody will know someone at the very least, whether it's their spouse, their kid, who's maybe going out into an entrepreneurial venture, a friend, a neighbor, anybody knows a small business owner. And we want to make sure that everybody is doing what they need to do and falling in line and being successful. And when that time comes, I hope that they will remember you and that they will reach out to you to help them set up their prenup and seatbelt for their business. And yeah, I look forward to having you again so we can talk about a little bit more about that. What shall we call it? I already used the word prenup, so I guess we'll have to talk about it in more legal, marital terms when the time comes and setting up businesses. So thank you. Thank you so much, Lawrence.
Thank you, Raquel. It's been a real pleasure.
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