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Are you a small business owner looking to ensure you’re compliant with all your federal reporting requirements? If so, you must familiarize yourself with beneficial ownership information (BOI) and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).
New in 2024, businesses nationwide will be asked to file a BOI report to avoid heavy fines and legal penalties. But is your business one of them?
BOI Report Key Takeaways
- Starting January 1, 2024, certain U.S. businesses will be required to submit a Beneficial Ownership Information (BOI) report.
- Failure to properly file a BOI report may incur severe civil and criminal penalties, including fines of up to $100,000 and up to two years of prison time.
- The deadline for filing a BOI report depends on when a company was created or registered. Companies created before January 1, 2024, have until January 1, 2025, and companies created or registered after January 1, 2024, and before January 1, 2025, have 90 days from their date of creation or registration.
Are you in compliance with the Corporate Transparency Act?
Beneficial Ownership Information: Definition
In late 2022, FinCEN issued new guidance implementing beneficial ownership information (BOI) reporting requirements as detailed in the Corporate Transparency Act (CTA). With an effective date of January 1, 2024, the clock is ticking for business owners everywhere to familiarize themselves with this reporting rule.
In simple terms, according to FinCEN, beneficial ownership information is any identifying information related to individuals who directly or indirectly control a company. The BOI report, therefore, refers to a specific report some business owners must file that details this information. The requirement doesn’t discriminate by size, so qualifying small businesses have just as much of a duty to follow the reporting rule as large ones.
The BOI report is part of a broader effort by FinCEN and the U.S. government to crack down on financial crimes. Specifically, the final rule aims to bolster corporate transparency. It will help law enforcement stop fraud, corruption, money laundering, terrorist financing, and similar activities.
For small business owners, this means that you have another compliance requirement to track. Keep reading to learn if you may need to share beneficial ownership information with FinCEN through a BOI report.
Do I Need to File a BOI Report?
Per the final rule set forth by the Treasury Department, any entity under the umbrella term “reporting company” must follow the beneficial ownership information reporting requirements and file a BOI report.
“Reporting company,” in this case, refers to corporations, limited liability companies (LLCs), limited liability partnerships, and others. Any entity created by filing business formation documents with a secretary of state or a similar office will likely be impacted. FinCEN further breaks this down into two subcategories: domestic reporting company and foreign reporting company.
The difference between a domestic and foreign reporting company is self-explanatory. A domestic reporting company is any company created in the U.S. A foreign reporting company is created outside the U.S. but registered to do business in the U.S. through a filing with a secretary of state or similar office.
Exempt Companies
Although the BOI reporting rule reaches far and wide across the business world, there are certain exemptions. Companies in certain industries that are already heavily regulated by the federal government are likely to be exempt from filing a BOI report.
Some key types of businesses that could be exempt are banks, credit unions, tax-exempt entities, investment companies, and accounting firms. FinCEN provides a list of the 23 potential reporting company exemptions.
BOI Reporting Requirements
If you’re a small business owner who needs to file a BOI report with FinCEN, you might be wondering how and exactly what kind of information you need on hand. Luckily, the information required for companies and beneficial owners isn’t too different from many others. However, there are some terms that you’ll want to be aware of. These include “Reporting Company,” “Beneficial Owners,” “Company Applicant,” and others. Learn more about BOI Reporting Requirements.
1. Reporting Company Information
As a reminder, a reporting company is any entity created or registered in the U.S. by filing a document with a secretary of state or similar office. When filing an initial BOI report, a reporting company must provide the following information:
- Full legal name
- Any trade name or “doing business as” (DBA) name
- Current U.S. street address
- State, Tribal, or foreign jurisdiction of formation
- Internal Revenue Service (IRS) Taxpayer Identification Number (TIN) (including an Employer Identification Number (EIN))
- State or Tribal jurisdiction of first registration, if a foreign reporting company
2. Beneficial Owners
Remember that a beneficial owner is an individual who directly or indirectly owns or controls 25% or more of the ownership interest of a reporting company. They might also directly or indirectly exercise substantial control over it.
Ownership interest refers to equity, stock, voting rights, capital or profit interest, or other instruments, contracts, or mechanisms that establish ownership. An individual has substantial control of a reporting company if they’re a senior officer, can appoint or remove officers or directors, is an important decision maker, or has any other form of substantial control.
It’s important to remember that there are some exemptions to the definition of beneficial owner. Special reporting considerations apply in situations involving:
- A minor child
- A nominee, intermediary, custodian, or agent
- An employee
- An inheritor
- A creditor
Once you’ve identified your company’s beneficial owners, you’ll need to provide the following information about them in your BOI report:
- Full legal name
- Date of birth
- Current street address
- Unique identifying number from an acceptable document, such as a passport or driver’s license, or a FinCEN identifier
- An image of the document with the identifying number
A FinCEN identifier is a unique number issued by FinCEN to individuals who’ve filed a BOI report or requested one. You can use it instead of providing an identification document number. You can request a FinCEN identifier through an online portal starting January 1, 2024.
3. Company Applicant
A company applicant is an individual who files or manages the filing of the document that creates or registers the reporting company. This could be an owner, manager, or agent of the reporting company or a third-party service provider, such as a lawyer, accountant, or incorporation service, who files on behalf of the reporting company.
Not every reporting company needs to report company applicants to FinCEN. You’re only required to report company applicants if you’re a domestic reporting company created on or after January 1, 2024, or a foreign reporting company first registered to do business in the United States on or after January 1, 2024.
Company applicants must provide the same information as beneficial owners:
- Full legal name
- Date of birth
- Current street address
- Unique identifying number from an acceptable document, such as a passport or driver’s license, or a FinCEN identifier
- An image of the document with the identifying number
BOI Report Deadline
The BOI reporting rule went into effect on January 1, 2024, but the deadline for filing your BOI initial report depends on when your reporting company was created or registered.
If your reporting company was created or registered before January 1, 2024, you’ll have until January 1, 2025, to file your initial BOI report.
If your reporting company was created or registered on or after January 1, 2024, but before January 1, 2025, you’ll have 90 days to file your initial report. Note that this 90-day period starts when your reporting company receives actual notice of its creation or registration or when a secretary of state or similar office first provides public notice of your reporting company’s creation or registration, whichever is earlier.
It’s also important to know that this 90-day window is only for 2024. From 2025 onwards, you’ll have 30 days to file your initial report.
Besides filing your initial BOI report, you must file an updated report within 30 calendar days of any change to the information you previously reported. Some examples of changes that would trigger an updated report are:
- Change in name, address, or identification document number of a beneficial owner or company applicant
- Change in ownership interest or control of a beneficial owner
- Change in the status of a reporting company, such as dissolution, merger, or conversion
File a BOI report with Block Advisors
Stay Compliant – File Your BOI Report with Block Advisors
By filing your BOI report on time and keeping it updated, you help FinCEN combat money laundering, terrorist financing, and other illicit activities. More importantly, you avoid potential civil and criminal penalties for non-compliance. Consider seeking the advice of an attorney who can review your specific circumstances and guide your decisions to confirm that you are doing what’s right for you.
Failure to file a BOI report can result in a $500-per-day fine, up to $10,000 total, and up to two years in prison. Disclosing beneficial ownership information without proper authorization carries a $500-per-day fine, up to $250,000, and up to five years’ imprisonment.
This is a serious compliance requirement. If you’re having a hard time understanding the requirements, don’t panic. Block Advisors can help you through every step of the process, ensuring your report is filed on time and correctly.
FAQs
What is a BOI report?
A BOI report is a form that identifies a reporting company, its beneficial owners, and its company applicants.
Who needs to report beneficial ownership information?
Under the CTA, all reporting companies need to report BOI to FinCEN. Reporting companies are entities created or registered in the U.S. by filing a document with a secretary of state or similar office unless it qualifies for one of 23 exemptions.
What is the deadline for filing the BOI report?
If a reporting company was created or registered before January 1, 2024, the deadline for filing a BOI report is January 1, 2025. Reporting companies created or registered on or after January 1, 2024, but before January 1, 2025, must file their BOI report 90 days after their creation or registration. Additionally, reporting companies must file an updated BOI report within 30 calendar days of any change in beneficial ownership information.
What is the penalty if you don’t file a BOI report?
Failure to file a BOI report can result in severe civil and criminal penalties. If you don’t file a BOI report, you could face a $500-per-day fine, up to $10,000, and up to two years in prison. If you disclose BOI without authorization, you could face a $500-per-day fine, up to $250,000, and up to five years’ imprisonment.
What is the difference between a BOI report and a BOI for taxes?
A BOI report identifies the reporting company, its beneficial owners, and its company applicants to FinCEN under the CTA and underlying regulations. A BOI for taxes refers to the beneficial ownership information that the IRS may require. Its definition of beneficial owner, threshold of ownership or control, type of information required, and reporting frequency may differ.
What is the BOI rule?
The BOI rule is the final rule issued by FinCEN that implements the CTA’s BOI reporting requirements. It aims to enhance FinCEN’s ability to protect U.S. national security and its financial system from illicit use.
Does a sole proprietorship need a beneficial ownership report?
No, a sole proprietorship doesn’t need a BOI report. A sole proprietorship is not considered a reporting company by the CTA because it’s not an entity created or registered in the U.S. by filing with a secretary of state or similar office.
This article is for informational purposes only and should not be construed as legal advice. You may want to seek the advice of an attorney to evaluate all relevant considerations.
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