Happy New Year, are You a Criminal?

Business Brain, episode 512 for Wednesday, January 3rd. Happy New Year 2024. Greetings, folks, and welcome to Business Brain, the show where we take a few ideas, we crunch them, we dissect them, we discuss them so that each of us, you, me, him, all of us, can tune our business. Easy for me to say. Tune our business brains together and really kind of focus on living that charmed life. Sponsors for this episode include gusto.com businessbrain, where you go to get three months of payroll, benefits, admin, and more. Totally free. We'll talk more about that in a little bit. For now, you here in Durham, New Hampshire, I'm Dave Hamilton.

And in Lafayette, California, I'm Shannon Jean. Happy to be here. Happy New Year. And it's great. We have Gusto Payroll. We're going to talk about payroll advances.

Yeah.

Intro. So I wonder if they offer this one of the things I'm going to talk about. But yeah, I'm excited to dive in.

Yeah, man. So. So talk about this. You found an interesting thing about payroll advances.

Yeah.

So we.

We've done some shows in the past. About one of them was episode 240 about how do you handle. You know, I've never owned a company with employees that at one point somebody didn't need to borrow some money.

Interesting.

It just happens.

Yeah.

My car blew up. Whatever I have, I'm moving and I need an advance because I need, you know, pay deposit, whatever. There's always a reason.

Yes.

And so one of my followers on X is a. He fancies himself as an independent hotelier.

With which I like Airbnb.

No, no, he owns a hotel.

Oh, he actually owns a hotel. Okay.

He actually owns a hotel.

Okay.

And. And so prash, which we'll link in in the show notes. You know, he posted a long thread about, you know, struggling with payroll advances and he mentioned a couple things which I just love that. One of them I knew about, but one of them I did not. And so I thought it'd be worth mentioning to our listeners.

Yeah.

A little bit more. You know what you would kind of anticipate with your payroll company is that more and more payroll companies are offering advances.

Sure.

So you don't have to do it. And the employee can reach out to the payroll company and borrow. Get an advance from them, not from you.

Right, right.

So there's always a solution. You don't have to be the bad guy to say no if you don't. Or pick and choose. Cause the problem with advances is once you start doing it, you you can't pick and choose who you do it for. Or, you know, you get to pick. It's subjective. Right. And people get upset. And especially if you have entry level employees that I would imagine maybe some of these folks fall into that category a little bit more.

Yep.

So I love this concept of turning it over to the payroll company and say, yeah, there's a process Right. Within payroll that you can go apply for in advance and they'll. And they'll manage it for you. I'm sure there's some fees involved. Obviously they, you know, they wouldn't do it, which. So I thought that was a great way to. That kind of punts it down the road, right? Yeah, somewhat to someone else.

Yeah.

But the one thing I really liked, which I was not aware of was called On Demand Pay.

Yeah.

Have you heard of this?

I Only from you. But I did find, and to be clear, like Gusto is our sponsor for this episode. They did not seed us with this topic. Like it just so happens we had this in the thing. But I did find a page on Augusto to see how they do it. They've got this Gusto Wallet app that employees can open an account through and do this. But then they also, in this article talk about On Demand Pay. Why don't you explain what that is?

Well, I don't know a ton about it other than, other than basically as you work, you can access your pay, your salary. So, you know, work a day, get, you know, get paid if you need the cash or whatever. You don't have to wait two weeks or whatever. Your weekly or bi weekly payment is monthly. Who knows. But with the app that these payroll companies are using, I think it's terrific. Now from a business owner, I don't know, you know, how do you manage your cash flow to that?

Right.

That's a little different because, you know, we always manage cash flow. Okay. We got payroll with this business on the 15th or payroll on the 10th or whatever.

Whatever. Yeah.

So you could, you. And you're anticipating those things. I don't know how it impacts your cash flow from, you know, if you're, if your employees are tapping into that a lot.

All the time. Yeah. Yeah. This is a rolling. It's essentially, you know, net zero.

Yes.

Of cost structure. Yeah.

And so I don't know. And I'm actually, I'm going to reply to this, this post on X that Prates did ask that question. Say, hey, how do you manage toward. To the cash flow aspect if you have all of a sudden half your employees go in and want to get their 20 hours or whatever of pay. So. Good question. And I just thought it'd be a good intro topic. If you're listening and you use on demand pay or you have a payroll advanced feature in your payroll company, reach out to us. Feedbackusbrain.show. we we'd like to learn more and share it with our 5,000 or so folks that download this show every week.

Absolutely. Absolutely. Yeah. All right, well, now it is time to talk about our sponsor, Gusto. And you know, you probably are like us and you didn't get into business to run payroll, right? If you did, you started a payroll company. But for every single one of the rest of us, we did not start a payroll company. And we really didn't want to be in the business of doing any of that in the first place. And that's okay because now there is our sponsor, Gusto. Gusto not only offers payroll, but also benefits, onboarding and HR all in one place to more than 300,000 businesses. So maybe you want federal, state and local payroll taxes to be filed automatically no matter where your employees work. I deal with this and it's such a headache to do it the manual way because you've got to, you know, I've got people all over the country and you got to file with each state as their unpaid steward. Well, you know, Gusto is here to help with that. Or maybe it's time to offer a 401k plan to help your employees save for retirement. Compliance with different regulations. Three out of four employers say Gusto makes it easier to be compliant with the government. And that's never easy. So that's amazing. With Gusto's simple guided software and user friendly interface, payroll and HR are no longer this exhausting thing they are rewarding. And if you want all this and more with no hidden fees, you get to try it out for three months free@gusto.com businessbrain that's gusto.com businessbrain that's that way they know that we directed you there. But also that way you get your three months free. You gotta check this out. So amazing. Again, gusto.com businessbrain and our thanks to Gusto for sponsoring this episode. Shannon, I found a really interesting thing that is going to impact pretty much all of us or at least all of us who have like LLC or corporations of some sort that, that aren't just our schedule C, right. That you know, we're filing as a self employed person and that is what we are calling FinCEN. And FinCEN is the, well, it's, it's the fincens Beneficial ownership information sort of mandate. FinCEN stands for the governments it is at fincen.gov Financial Crimes Enforcement Network. And all of this starts just the.

Type of entity I want to be associated with.

Oh, yeah, yeah, yeah. If I ever got a letter from something that was called FinCEN, I would be panicked. Like, oh my gosh, like, what did I do that caused this? And did I know that I did it right?

Did you know you're a criminal?

Did I? Yeah. Happy New Year.

Yeah.

Are you a criminal? That's it, right? So here's the thing. This started on January 1st, 2024. And if your company existed prior to that date, you have until January 1st of 2025. So almost a year to file with the Financial Crimes Enforcement Unit. And we almost like almost all of us are going to have to do this. If you run a nonprofit, maybe not if you run a publicly traded company, almost certainly not. But what they want is beneficial ownership information for your LLC or, you know, subchapter S Corp, or, you know, your C Corp, even assuming it's not publicly traded, they want this. So this is very similar to what your bank, every bank now requires for the KYC that know your customer things right, where they want to know who owns more than 25% of your LLC. Now the thing, and all of this sort of makes sense when you read their explanation, which is they want to make sure that, you know, it's to help stop money laundering. And all the same reasons that the banks want this information and the banks don't actually want it. They are mandated to collect it. It's really what it is. I get it.

Yeah.

Yeah. And, and so like all of this makes sense to me and I look through some of it and it doesn't seem like it's overly burdensome reporting, other than it's yet another thing you gotta send in. But the part that's weird to me is, isn't this already on our tax returns, like as part of the K1s and the like? When you file the 1065 form for a partnership, like all of the owners, whether they're 25% or 1% are listed on there.

Yeah.

So I don't get it.

Like, I don't get it either. And now if you, if you open or start a new entity after January 1, 2024. Am I right in that they're going to capture all this information in some new system when you like start an.

Llc, this kind of thing I believe that's right. They, they will give you, they said if you already have a company in existence, you have a year essentially, you know, to, to fill this out. If your company comes into existence after this point in time sometime in 2024 or later, then I think they will give you like they'll send you a notice and tell you you're on a 30 day clock or something like that.

Yeah, I mean there are just tens of millions of entities LLC and things that are, are going to be out of compliance with this. Right. I mean it's, well, I mean I.

I, I am the moment that of course this, you know, that, that started. But, but of course we have the grace period of a year.

A year. So I, I, I wonder if they, yeah, and I have that same question. Why, why can't they access that information already without having us have to go up and file some kind of thing. And as we're recording this, that filing isn't available because we're recording a little early due to the holiday. But by the time you listen to this, you'll be able to go, it's FinCEN.

F I n C-E-N.gov yeah, and so what, what I think is we will each as individuals have to go and register with this system. So this is the difference. If you are a member of an llc, you have to go as an as yourself and get a FinCEN ID that then the LLC attaches to. And if you are. Okay, so I'm starting to understand this as I'm digging in and I'm hoping you folks, somebody out there must understand this better than us because if that's not the case then that would surprise me or in trouble. Yeah, yeah, but, but it, it, the, the idea is they want to make sure they can ferret out people who are using shell corporations to hide the actual ownership of a company or other entity so that those, because that's the path that a lot of money laundering uses, right? Is you've got layers and layers of shell corporations. So the idea here is that if you are a member of an LLC as an individual, you go and register yourself as an individual and then that ID number attaches to your llc. If you are a company that is a member of an llc. Right. Like we could, you know, you, it could be that my Dave the Nerd LLC owns my shares of our business Brain llc. It's not Business Brain llc. Yeah, it could be that way. It's actually not, but it doesn't matter, you know, and so that company would Then need to register for a FinCEN ID. But I would. If I owned all the shares of the Dave the Nerd llc, I would have to. So they can easily, in a database, trace it back. Because right now on our tax returns, there's no, like, connection. There's no connection. It's like, yes, everything's listed, but you might have to go through 14 layers.

They do it. Don't you think they should do it for, like, companies that are, I don't know, million bucks, 5 million, I don't know, $3 million or more in revenue or you think it doesn't matter? They could hide it with all this difference?

Yeah, I mean, I think if they did that, then what you would do is start a new company every time you hit that. Every time you hit that threshold. Yeah. So this is, this is their way of. They, they probably ask that question, Shannon, would be my guess.

Probably.

Yeah.

Smarter much?

Yeah. Yeah. Yeah.

I mean, my. I don't like to be associated with any government entity at all. No, I, I, to me, this is one more burden that I've got to go up and I'm responsible for doing it, or I'm breaking the law, so to speak.

Yes.

And it's just one more burden on small business owners that have to keep track of a mountain of paperwork that I guarantee you, I am perpetually out of compliance with.

Yes.

And so, but I guess if, once, if you're starting a new entity, you know, then it makes sense because it just becomes part of the process.

It's just the process. Yeah. And my guess is once we, like, I, you know, I, I have whatever, four LLCs, five, something like that, whatever.

Yeah, same.

So I'm going to have to go and register myself. Obviously, I'm going to need to make sure my partners register themselves. So, Shannon, consider this your, you know, first request. Thank you. Thank you. Yeah.

When I get my 1099.

Yeah, exactly. And then, but then hopefully after the first year of this, the, you know, the, the onboarding, if you will, it just becomes, you know. Oh, yeah, that. Check the box. Is it the same? Yep, it's the same. Okay, great. You're done. Hopefully.

Yeah.

Like, I'm hoping that this is actually what they're saying. On the surface. It is. And now I know how databases work and I know how human nature is. And once we have data, we use it for different reasons than we initially said and perhaps even initially thought we would. Yeah, right. You know, so I don't like that this database is going to exist. I don't do any money laundering.

Correct.

I'm wondering if somehow this will make getting a bank account easier. If like all of this stuff, like, could I say, oh, yeah. Here's the, you know, tax ID of our business through. They check it with the government. The government says, yep. That business is totally in compliance. And now the bank's done. They don't have to do this. That won't happen, by the way. Efficiency is not a thing.

But yeah, yeah, they have a, A, an interesting flowchart, but, you know, that kind of walks you through whether or not you, you are a. What they're calling a domestic reporting company.

Yes. It's going to be most of us.

Yeah, I think so.

Yeah. Yeah. Fascinating though.

It is fascinating and I'd certainly like to learn more. Those of you are in this kind of compliance space, if you know more about it. Feedbackusbrain show. Or you can go up on X and, you know, post or send us a message at bizbrain Show.

That's us handle up there. Yep.

Love to hear from you. Remember, we're all here to help each other grow our business brain. So share your knowledge.

Please do. We'll spread it. Yeah, absolutely. Like he said, feedback at businessbrain Show. And go check out gusto. Com. Businessbrain. Get those three months free and enjoy. Keep on living that charmed life. We will see you on Friday.