Unveiling the Corporate Transparency Act feat. Garrett and Ted Sutton

Hello, future billionaires. Welcome back to another episode of the Invest Like a Billionaire podcast. Today I had a great interview with Garrett and Ted Sutton, both attorneys, and they came to talk about the Corporate Transparency Act. And you may be thinking, why would I want to listen to a podcast about corporate transparency? This sounds very boring. Well, let me tell you, it's something that you absolutely need to pay attention to. And this is a new law that was passed just this year, beginning of 2024, that impacts over 30 million entities in the US. And so if you have any LLC, this impacts you and it can impact you in a pretty substantial way if you're not compliant. So they came to talk about what they feel is a massive sea change in reporting and transparency, and no one's really talking about it, but the implications of not complying are pretty massive. So this is something you absolutely need to listen to if you are an owner or a manager of any LLC. And they come with a lot of great insights, a lot of things that are going to be really helpful to sort through What needs to happen? How do I need to do this? Who does this impact? What are the implications? All that and more. And it's pretty funny because Garrett is the father, Ted is his son. Garrett is part of the Rich Dad Advisors. He's been around for a long time with Robert Kiyosaki and has actually sold over 1 million books of the 8 books that he's written. So these are very, very knowledgeable folks and very excited for you to listen to this episode. If you're enjoying, please subscribe, leave a review, share with a friend. Always appreciate that, getting the word out. So with that, enjoy. Enjoy the show. This is the Invest Like a Billionaire podcast where we uncover the alternative investments and strategies that billionaires use to grow wealth. The tools and tactics you'll learn from this podcast will make you a better investor and help you build legacy wealth. Join us as we dive into the world of alternative investments, uncover strategies of the ultra-wealthy, discuss economics, and interview successful investors. Looking for passive investments done for you? With Aspen Funds, we help accredited investors that are looking for higher yields and diversification from the stock market. As a passive investor, we do all the work for you, making sure your money is working hard for you in alternative investments. In fact, our team invests alongside you in every deal, so our interests are aligned. We focus on macro-driven alternative investments so your portfolio is best positioned for this economic environment. Get started and download your free economic report today. Welcome back to another episode of the Invest Like a Billionaire podcast. I am your host, Ben Frazier, and today I'm joined by not one but two guests, both with the same last name. Garrett and Ted Sutton of Corporate Direct. Very excited to have them come on the show and talk about the Corporate Transparency Act, which is something that you may have heard of, may not have, but it's something you absolutely need to pay attention to. So Garrett and Ted, thanks for coming on the show.

Thanks for having us, Ben.

Yeah, thanks for having us on.

Yeah. So set the stage for us a little bit, Garrett. Tell us a little about your background and then hand it off to Ted and bring us up to speed on what you guys are doing, how you've been in the space for a while and how you're helping, helping folks.

Well, about 20 years ago, I became associated with Robert Kiyosaki and the Rich Dad Advisor Group. And it's just been great traveling around the United States and around the world with Robert talking about financial education. Ted has been on some of the trips to Australia and Chile and other locations. And, you know, it's just been really rewarding to help people understand that they need to take control of their own personal financial situation. And so I'm the attorney in the group, and I talk about asset protection, the use of corporations. And now we have this new law, this new federal law that no one's talking about called the Corporate Transparency Act. So, Ben, we're looking forward to speaking about it with your audience so that they can be they can understand what's required of them because the penalties, if you fail to follow this new law, are pretty significant.

Yeah, absolutely. Ted, share a little bit about your background because it's fun that you get to work with your father. And I don't know if you guys knew, but I actually work with my father here at Aspen Funds, and it's been actually one of the biggest joys of my career so far. It's been really cool. So talk about what your background is and how you've kind of started working together.

Yeah, so I think it's really cool that you mentioned that working with your dad is an awesome experience. There's a stigma out there that, you know, oh, do you really want to work with your parents? Sometimes I get that from people, but overall it has been a really good experience. You know, he's a good mentor, so it's all been good. So my background was, I went to college, I got a degree in mining engineering, but I spent a summer working at a mine in Chile. Had a great time, but I didn't really want to make a career out of it. So after I graduated, I switched gears, decided to go to law school and follow my dad's footsteps. So I graduated, passed two bar exams, and pretty much I've just hit the ground running with asset protection. And then the fact that the Corporate Transparency Act just took effect right after I got licensed. So that's been really interesting. Yeah, but like I said, there's a lot going on and it's been good working with him.

That's awesome. Well, I would love to get into some of the asset protection stuff here a little bit. It's obviously a very relevant topic, especially for a lot of our listeners. But while we're on it and while it is kind of a hot topic and, you know, I've started hearing some of the rumblings, we have all of our, you know, service providers reaching out to us, hey, have you heard of corporate transparency? Are you doing CTA? And it actually is pretty impactful for us as an operator of lots of different properties and LLCs and other things, it's a pretty big change. It's actually going to change the legal disclosures we have to put in all of our offering memorandums. And so give us this, set the stage of what is the Corporate Transparency Act, you know, and why is it important and what does it mean if you're not complying? What are some of the ramifications here?

Yeah, so the Corporate Transparency Act is a new federal disclosure law It was passed in 2021 and it just took effect on January 1st, 2024. So, you know, about 2 months ago. And what it requires is it requires small businesses to report information to the federal government. They need to report information to this body called FinCEN. It stands for the Financial Crimes Enforcement Network, and it's a branch of the U.S. Department of the Treasury. And it's a huge sea change from what we've been used to for the last 50 years or so, because when you set up an LLC or a business, usually you only file information with the Secretary of State. You know, you get your articles and you're good to go. But this new law requires these same businesses to additionally report information to the federal government. And, you know, the reasons for passing this is because of money laundering, terrorist financing, and the fact that people use shell companies to conduct illegal activity. You know, I think a lot of it's anecdotal, but the biggest thing is that if you don't comply with this new law, the penalties are very severe. If you don't submit your information to FinCEN, you could face penalties of up to $10,000 in fines and/or 2 years in prison. And it's really unfortunate because a lot of small business owners are left in the dark. A lot of people aren't talking about it. So it's really important that we get the message out that this act is real. It has very severe penalties. And at the end of the day, more people need to know about it.

Yeah. So you kind of mentioned a little bit of the impetus of, of this. I mean, it seems like a— you said a pretty big sea change, but why aren't we hearing more about it? Right. If this is something that is going to impact like literally every single business, every single LLC, like what's the deal? Why haven't we heard more about it? I mean, I'm one that has probably what, 30, 40, 50 LLCs that I'm an owner of and operate in some capacity. And I still don't have it all sorted out of what we have to do. I mean, that's going on.

No, it's not a popular law. You know, a lot of people are angry by it. There's this information out on the web that it's going to be repealed when, you know, after the election. There's not enough time after the election to repeal it. So it is, it is the law. You, if you have an entity that was set up in 2023 or earlier, you have all this year to file. You have to file by December of 2024 if you're an existing entity. If you're a brand new entity this year, you have 90 days to file this information. And so it's just, it, again, it's not a popular law. The federal government isn't really you know, happy to talk about it. And so it's up to people like us who are in the business to let our clients know because again, the penalties are really severe. And so we just want everybody to know, and here at Corporate Direct, we can help you get through this filing requirement because we want everybody to follow the law.

So the idea behind it is, hey, there's a lot of you know, money laundering going on and using different shell companies and, you know, undisclosed ownership of different corporations or LLCs. They're just, the idea of corporate transparency, becoming more transparent in the ownership of the different companies that are registered, right? So is that really the big driver? And you kind of mentioned something that was interesting. You said it's mostly anecdotal, I'm assuming. Obviously if it passed into law, it got bipartisan support, but I would assume that maybe there's other side of the story that there's not as much behind these companies as some people might think, or what's kind of led you to say anecdotal?

Yeah, so I said anecdotal because a lot of it's based off of my dad's experience. You know, he's been doing this for over 30 years and he hasn't come across any client or anything like that who's done illegal activities. And I think the other side of it is that the law-abiding, good faith small business owners are going to be the ones who are bearing the brunt of this new law. You know, the Wall Street Journal raised it in an article a few months ago. They said it's supposed to, you know, collect information on criminals and people who, you know, are conducting illegal activity. But you need to ask yourself, will these criminals self-report? Report? I mean, probably not. I mean, criminals break laws all the time. So it's just, it's really unfortunate because all the good actors out there are going to be the ones who are going to bear the burden of this new law.

I mean, it also just seems like if you're going to have every single business report, the administrative burden of that, I mean, we all know how efficiently the government is run. Creating a whole new government agency to now manage and do all the administration. I mean, this is going to create a huge just burden of taxpayer money to have to manage all this stuff, number one. And not to get political, obviously, but I mean, do you think there is a case— you said it probably can't get repealed by the time the next election happens. There's— sounds like there's a window for that. But I mean, do you think it's going to be around for a while and at the end of the day, it probably doesn't matter because it is law, as you said, and this is something that you have to comply with whether or not it gets changed in the future. Is that accurate?

I would say that's accurate. I think the federal government, you know, the elites on both sides want more information about us. And this database that is being prepared by the US Department of the Treasury will be available to FBI, CIA, certain foreign intelligence agencies, you know, Britain's MI5. With a warrant, local law enforcement can get into this database. So they're collecting this information so that they have more information about business owners in the United States that— or if you're a foreign company doing business in the US, you also have to report. So this is this one giant database that will allow law enforcement and who knows who else. You know, it's not— it's like the IRS. Your tax returns are confidential. This is not information that anyone can get at, but it is information. It's going to be a very rich database for law enforcement to understand what people own.

So who has to comply with this? Is it any owner of any entity? Is it active entities? What information is being reported? Talk a little bit about, about that.

Yeah. So the Corporate Transparency Act, it requires 3 pieces of information to be reported. So the first is the reporting company information. So this is about the company itself. And the definition of a reporting company is any entity that's created by filing a document with the Secretary of State. So these are LLCs, limited partnerships, corporations, all of that. You know, if it's not filed with the Secretary of State like a general partnership, sole proprietorship, that doesn't matter. But in most cases, if you have an LLC, you're going to have to report. There are some exemptions there. You know, if you're a bigger business, you don't have to report. There's a few other exemptions. But in most cases, if you have an LLC or another entity, that's formed, you're going to have to report. And then the second piece of information is called the beneficial ownership information. And these are the people who own the company. So this is anyone who either owns 25% or more of the company or they exercise substantial control over it. So they have any management authority. So, you know, either or if you meet one of both requirements, one of the two, then you're going to have to report information to FinCEN. So, you know, it affects 30 million entities, and at minimum, you're going to need to have at least one owner of those entities report information. So it definitely does have a really broad reach.

Wow, 30 million entities. It's just in the US, right? I mean, this is— that is crazy.

They expected 30 million entities to report in 2024. But FinCEN has only collected 400,000 reports in the month of January. So they're on pace for 5 million, even though they expected 32 million to be filed in 2024. So they're way behind schedule. You know, less than 20% of entities are reporting. But that just shows the importance of knowing about this new law. So it's definitely a good thing that we're talking about it now.

Well, absolutely. I mean, it's so interesting to me. It's like you're saying, this is a pretty broad scope, pretty big change, pretty significant for any owner of any LLC. And in my case, I'm probably a pretty prime candidate because I have a lot of control over a lot of different entities and, you know, syndications and funds that we manage. I'm still confused, right? I'm like, what are we really to do? And I haven't had a few people reach out about it. And I know there's some different deadlines that are, you know, maybe the pressure isn't on yet, but yeah, it's just interesting that it hasn't got more. I mean, so this is, it's interesting from multiple standpoints. One would be obviously if you are a business owner, if you're an entrepreneur and you have a business that is not a sole proprietorship or a partnership, as you said, it's an LLC, you need to be aware of this, right? This is something you need to, you know, reach out to your attorneys, reach out to Garrett and Ted at Corporate Direct and get an idea of what you need to do, what you need to be providing. But the other side of this too, which has been interesting as I've had a little bit of conversations around this, is from my standpoint, right, where we're raising capital and going to purchasing properties or, you know, oil and gas assets, We are, you know, providing, or we have an ownership chart of all the investors in our funds or syndications. But if someone has now invested more than 25% of the overall capital in that particular entity, we're now required to share their information, right? I mean, this is pretty significant from a standpoint of they're now in, control, but they own a big enough percentage. So from an investor standpoint, you may think, I'm not a business owner, I don't have an entity, you know, I'm retired or I, you know, W-2 employee. Well, you still may— this may impact you depending on the different ownership that you have in your investments. Can you talk about that, that side about it a little bit?

Well, it's a very good point because a lot of people will have an investment where, you know, they're 25% or more And they may not know about this, but the promoter of the fund is obligated to get their information into the federal government. Now, if the entity was formed prior to 2024, they've got until the end of the year to do that. I wouldn't wait until December though, 'cause that's when there's going to be a rush on it. I, I would get it done before December of 2024. The other thing to know, Ben, is when we're putting together this information that we have to report to the federal government, we need a driver's license number or a passport number, and we need an image of that driver's license or passport that needs to be filed with the federal government. So let's say you have a syndication and there are 3 guys that are in there for 25% or more. They're 25% greater owners, you have to collect the information from them and report it to the federal government. And you've got to track down, you've got to get them to send an image of their driver's license to get that into this database. The other requirement, Ben, is you don't have to do this every year, but if their driver's license expires, next year, you've got to amend the report. So you've got to get their new driver's license into the federal government. And so these syndicators who have, you know, 25% or greater owners, or some of the owners are general partners that have substantial control, all this information needs to be collected. And we've been doing this since January 1st, and it takes a while to get people to send in this information. So it's not an easy task.

Yeah. And obviously you mentioned some penalties for not complying. Can you just recap what some of those are?

Yeah. So there's two main penalties that people need to know about. The first is that if you don't report this information on time, you know, it depends on when you set it up. But if you past that 20 days from when you're supposed to report it, you can face up to $10,000 in fines. And if you willfully avoid this law, so if you know about it and you ignore it, then you can face up to 2 years in jail. And you know, the government will make examples out of people. There will be some people who will know about this law and they'll, you know, sort of willfully disobey it, those are the people who are going to end up in jail. I hope, you know, that's likely to happen. But, you know, it's— this law definitely has some teeth to it. And if it didn't have teeth, we wouldn't be talking about it right now. But the penalties are very severe. And as I mentioned, $10,000 in fines and/or 2 years in jail. And those are the 2 things that people need to know about. And you know, that's why it's best that we're talking about it. And we just need to make sure that people are going to comply with it too.

Interesting. And does that fine go to the beneficial owners of the entity or just those that have control or potentially both?

I don't know. I mean, what do you see?

Yeah, so the burden's technically on the reporting company, um, but, you know, indirectly the beneficial owners of that company will be the ones bearing the brunt there.

Yeah, interesting. I mean, I can imagine, you know, certain people that obviously like anonymity or don't want to hand over information to the government, it's like, why would I do that, you know? And it's, you know, it's obviously early stages, we don't know exactly how far they're, you know, or deep they're going to go, but I mean, this is, like you said, law and you have to comply or pretty serious implications of not. Anything else around this new law that we need to kind of be thinking of or just kind of to put in people's minds?

Yeah, well, I think it's just important to have somebody on your team who can help you through this. You know, Kiyosaki talks about having a team around him. You know, it's the same in sports, it's the same in life. It's important to have trusted advisors who know what they're doing, who know the ins and outs of this law. We here at Corporate Direct have been preparing for it for the last 3 years. So, you know, if you want to schedule a free 15-minute consultation with us or you want to have a call with either my dad or myself, you can head on over to corporatedirect.com and we'd be happy to help you guys out.

And one other thing, Ben, is that if you have an entity prior to 2024, you've got the, this whole year to file. Now let's say you set up an entity next Tuesday, it's in 2024, you have 90 days to report this information. And then in 2025, you've got 30 days to report the information. Now syndicators a lot of time will set up the entity and not know who the investors are for a while.

Right.

And so what you've got to do, if you're within next year, 2025, if you're within that 30-day period, you're going to let the government know who the controlling people are. And then as you bring investors in and they have control or they have 25% or more, then you've got to amend the filing to be compliant. So there will be strategies that people will have to employee, because with a syndication at the start, it could take 6 months to get everybody into it. And so you've got to amend the filings to be compliant.

And is the amendment timeframe kick off as soon as you've changed the ownership, or is it kind of like you do a first filing of the LLC and then you say you raise capital for 6 months and now you close the offering, is that the point you start the amending filing or you have to do it halfway in between if there's changes?

And that could be after when, when someone comes in who's a 25% owner, you've got 30 days to file.

Okay.

Yeah. Now it's also important to know, Ben, that New York has a law, their own Corporate Transparency Act. And when you file an LLC in New York now, you have to— you don't have a 30 or 90-day window. When you file an LLC in the state of New York, you've got to provide this information right at the start. So complicating issues with New York and California is thinking of putting in their own Corporate Transparency Act. So some of these states are starting to follow the federal government.

Yeah.

Interesting requirement of information.

Now, I know your background, you know, Garrett, has really been asset protection for a long time. You know, give us just some, some high level. You read a lot of books on this. We don't have time to go into super depth, but, you know, does this kind of shift any of your perspective on things you need to do from asset protection standpoint? Is this, you know, what are some just basic things you should be thinking about even with potentially the the Corporate Transparency Act on the horizon, you know, as, as a new nuance?

And that's a good question, Ben, because, you know, we, we need asset protection. We live in a very litigious society. People are suing each other all the time. And so when I buy a duplex, I want title in the name of an LLC so that if a tenant sues, they can get what's inside the LLC, but they can't get at my personal assets. Now we have the Corporate Transparency Act, and this is a filing you need to make, as we've said, with the federal government. But for me, I would always have the LLC despite having this new filing requirement, because asset protection for me is more important than the government having my information on the LLC. In other words, I would never go forward with owning real estate, with owning a large stock portfolio with running a business. I would never go forward as a sole proprietor or a general partner without asset protection simply to avoid the Corporate Transparency Act. So as we weigh everything out, asset protection for me is much more important than this filing requirement.

Yeah. What you're saying is, hey, you know, to create LLCs to create some levels of protection between me and an entity and whoever the end user of that business or real estate is. Well, now it's kind of— I don't really want to do it because now if I have a new entity, I now need to go report on it. But you're saying the asset protection is so much more important than a reporting requirement from just a— yeah, from that standpoint. So that That makes a lot of sense. And what are just some, some real basics of folks that may be newer to asset protection? What are some of the biggest potential pitfalls or risks or things that people may not be thinking about that they need to be thinking about from the asset protection side of things?

Well, I think at the start you need asset protection. You know, you'll hear CPAs tell people that, you know, you're just getting started. Maybe you can't afford an LLC or a corporation. But you know, when you get, just get started, that's when you make mistakes. And if you have, if you're doing business in your individual name, you are personally responsible for those mistakes. So at the start, it's not expensive. We want to set up that LLC or corporation right at the start because what happens is you get into business and you forget to form the LLC. You get busy and it just is something you will get to at some point. But you're operating through a sole proprietorship or a general partnership, and you're personally responsible for everything that happens in that business up until you file for that corporation or LLC. So right at the start, we need asset protection.

Yeah, makes sense. Makes sense. It's one of those things that seems easy to put off, but the longer you wait, the harder it is to to pull the trigger and the more, you know, things you have to change down the road. So, you know, why, why not get started now? I think that makes a lot of sense. Talk a little about Sunstream. I wrote in my notes you guys have a pretty cool thing you're doing with Sunstream. So talk about that a little bit.

Well, we have a new streaming platform called Sunstream, S-U-N-N-Stream, and you can go to.com and see what we have. We want to focus on kids' financial education. They're not teaching enough of this material in the schools. So we're going to be providing kids financial education videos. And Ted wrote a free book for parents. So I'll let him tell about the free book that you can get at Sunstream.

Yep.

So my free book is called The 5 Tricks to Teach Your Kids About Money. Now, it's not tricks in the sense like you're playing a prank on your kids. That would be mean. I don't condone that. But it's just 5 methods. It walks you through 5 methods that you can use to educate your kids about money. Because a lot of the time I get asked about, oh, well, you know so much about financial education with Robert, like, how do I teach this to people? So this really walks you through the how, as it just gives you 5 things that you can do. And at the end of the day, the whole point is just to boost kids' financial IQs. Because if they're financially responsible and they're instilled those values at the beginning, then it'll be much better. You will be much better off later on because they'll eventually take care of you.

I think, you know, you want your kids to be educated so they can take care of you at the end.

Yeah. So, and so you can head on over to Sunstream, go to the address bar and type in sunstream.com. .com/5tricks, and that should take you to the page where you can download the free ebook.

And it's done with, with two N's, you said, right?

Yep, with two N's. And I should mention that I really want to close the gap with my dad. I've only sold 220 copies right now, and he sold a million. So if you can really help me out, I would greatly appreciate that.

Okay, you guys heard it. We got it, podcast listeners. Let's go get them up to a million. So I don't know if we have quite quite that number just yet, but maybe over time.

Yep. And it's totally free, by the way, too. So I'm not, you know, profiting off of it.

No, I think that's so cool you're doing that. I'm very big on financial literacy for kids. And I mean, that's kind of the whole point of why Robert Kiyosaki wrote his book originally, right? Is just the education that was being taught and that most people, the advice they follow is just, you know, here's the path laid out for you to stock money away in a 401 till you're 65 and then hopefully have enough to live on. And, you know, forging a different path and teaching people a different way to think about money is so important. And forming those ideologies and frameworks earlier on is so, so helpful. So love that you guys are doing that. This was a really, really great episode. You guys are a great, great team and appreciate the information. I mean, I think As much as we don't want to think about this Corporate Transparency Act, like we have to deal with it and we need to be thinking about how it impacts us as owners of entities. And so appreciate you guys sharing that, spreading the word. I think this is going to be really valuable for our listeners. And yeah, say the name of the Corporate Direct website again so people can find a way to get ahold of you. We'll put all these links in the show notes as well.

Yeah, CorporateDirect.com is the main website and you can schedule a free 15-minute consult with an incorporating specialist if you need to set up a corporation or an LLC, or if you need to get your entities filed with the federal government. So we do offer that service for helping people through the Corporate Transparency Act.

And just to add on to that, Corporate Direct also has a YouTube channel. So if you go to YouTube, type in the search bar Corporate Direct, You'll find our channel. Please make sure to subscribe to it. I post videos there once a week. I post on topics regarding the Corporate Transparency Act and corporate law. So if you can head on over there and subscribe, I would greatly appreciate that.

Awesome. Sounds good. Well, thanks so much for coming on the show, guys. Really appreciate it. And I definitely got a lot of value from today.

Great. Thank you, Ben, for having us.

Yep. Thanks, Ben.