BOI Reporting

What is a BOI Report?

The Beneficial Ownership Information (BOI) reporting requirement was introduced as part of the Corporate Transparency Act (CTA), which was enacted on January 1, 2021. This regulation mandates that certain businesses in the United States must disclose information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). The reporting requirement is applicable to companies formed or registered after January 1, 2022. If your company existed prior to this date then you must comply by providing your beneficial ownership details within a specified timeframe. The BOI requirement was introduced to enhance transparency in corporate structures and combat illicit financial activities, like money laundering, fraud, and tax evasion. By ensuring that the true owners and controllers of businesses are identified and reported, the BOI aims to close loopholes that have historically been exploited for financial crimes.

Why is the BOI report important?

The BOI report is crucial for a number of reasons:
Transparency: The BOI report plays a vital role in unveiling the true ownership and control structure of a company. By providing clarity on who actually owns and controls a business, it builds trust among stakeholders, including investors, partners, and customers.
Prevention of financial crimes: One of the primary purposes of the BOI report is to help authorities effectively track and prevent illicit financial activities. By accurately identifying beneficial owners, the report helps combat financial crimes. This proactive approach helps maintain the overall health of the financial system and protects businesses from becoming unwitting participants in illegal activities.
Compliance: Following federal regulations is a critical aspect of business operations, and the BOI report is instrumental in ensuring compliance. By providing accurate and up-to-date information on beneficial ownership, businesses can avoid hefty fines, penalties, and legal complications.
Enhanced corporate governance: The BOI report contributes to improved corporate governance by promoting accountability and oversight. It ensures that the individuals who truly control a company are recognized and held responsible for their actions. This level of accountability can lead to better decision-making processes, reduced risk of conflicts of interest and stronger overall management practices.
Facilitating due diligence: The BOI report is a valuable tool for businesses involved in mergers, acquisitions, or partnerships. It provides potential partners with a clear understanding of the entire ownership structure, helping them make informed decisions. This transparency can speed up transactions and build confidence among all parties involved.

What is the definition of a beneficial owner?

A beneficial owner is someone who has direct or indirect significant control over a company that reports information or if they own or control at least 25% of the company. This could encompass:
• Direct Ownership – Refers to individuals who hold ownership stakes in a company or asset directly in their name.
• Indirect Ownership – Refers to individuals who control ownership through mechanisms like trusts or intermediary companies.
On the other hand, there are also a few categories of individuals who do not qualify as beneficial owners:

Who needs to file a BOI in 2024?

Starting in 2024, the requirement to file a BOI report primarily applies to a wide range of legal entities, particularly those that are created by a filing with a state or tribal authority. The entities that need to file a BOI report include:
• Limited Liability Companies (LLCs),
• Corporations,
• Limited Partnerships (in most states), and
• Limited Liability Partnerships.

The CTA does not apply to sole proprietors because no document needs be filed to legally establish a sole proprietorship. You simply start a business you own yourself.

Where to file the BOI report?

To file the BOI report, businesses need to access the FinCEN online filing system, where they can submit the required information regarding their beneficial owners. It’s crucial to ensure accuracy and completeness when filing this report to avoid potential penalties and to remain compliant with federal regulations.

When is the BOI report due?

The deadlines for filing a BOI report depend on the specific circumstances of the reporting company:
New companies: Newly formed or registered companies must file their BOI report within 30 days of their formation or registration.
Existing companies: Companies already in existence before the implementation of the BOI reporting requirements must file their initial BOI report within a specific timeframe set by the regulatory authorities, typically within one year of the rules taking effect.
Changes in information: If there are changes in the beneficial ownership information (like a change in ownership or control), the company must update its BOI report within 30 days of the change. You must note that if you fail to file on time, there may be penalties.

What are the Penalties for Non-Compliance?

Civil penalties of up to $500 for each day that a violation continues, capped at $10,000.

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