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The Ultimate Guide to BOI Reporting Requirements

Learn everything about BOI reports: filing requirements, key components, exemptions, and penalties to ensure compliance and transparency.

BOI Report: Your Small Business’s Guide to Compliance

If you’re a small business owner, BOI report requirements under the Corporate Transparency Act may seem daunting. Here’s what you need to know:

  • Who needs to file?: Existing companies by January 1, 2025, new companies have 90 days upon registration.
  • What to file?: Details about the company and beneficial owners, such as full legal name, date of birth, and ID information.
  • Why?: To curb illicit finance activities like money laundering and terrorism.

The Corporate Transparency Act (CTA) aims to combat financial crimes by eliminating corporate anonymity. By requiring entities to report beneficial ownership information (BOI), the CTA seeks to enhance transparency and protect the U.S. financial system from illicit activities.

Under the CTA, the Financial Crimes Enforcement Network (FinCEN) collects and safeguards BOI. Janet L. Yellen, Secretary of the Treasury, highlighted the importance of this initiative: “Corporate anonymity enables money laundering, drug trafficking, terrorism, and corruption. A centralized database of beneficial ownership information will eliminate critical vulnerabilities…”

I’m Nischay Rawal, founder of NR CPAs and Business Advisors. With over a decade of experience, I’ve helped numerous businesses navigate complex financial landscapes. Let’s dive into how you can stay compliant with BOI reporting requirements.

Steps to File a BOI Report - boi report infographic step-infographic-4-steps

What is a BOI Report?

A Beneficial Ownership Information (BOI) report is a critical component of the Corporate Transparency Act (CTA). This report aims to identify the individuals who own or control a company to prevent illicit activities like money laundering and terrorism financing. The Financial Crimes Enforcement Network (FinCEN) oversees the collection and safeguarding of this information.

Key Components of a BOI Report

A BOI report includes detailed information about the company’s beneficial owners. Here’s what you need to know:

Beneficial Ownership

A beneficial owner is an individual who either owns at least 25% of a company or has substantial control over it. This could be a senior officer, an important decision-maker, or someone who can appoint and remove officers.

Corporate Transparency Act

Under the CTA, companies must report their beneficial ownership information to FinCEN. This law aims to increase transparency and make it harder for bad actors to hide or benefit from illicit activities.

Reporting Requirements

The BOI report must include specific details about each beneficial owner. Here’s what you need to provide:

  • Full Name: The legal name of the beneficial owner.
  • Date of Birth: The exact date of birth of the beneficial owner.
  • Address: The current residential street address of the beneficial owner. P.O. boxes are not allowed.
  • Identification Number: A unique identification number such as a Social Security Number, passport number, or other government-issued ID.
  • Document Image: An image of the identification document, such as a driver’s license or passport.

Identification Documents - boi report

Ownership Control

Ownership control refers to the ability to influence important company decisions. This can include:

  • Serving as a senior officer (e.g., CEO, CFO)
  • Having the authority to appoint or remove senior officers
  • Directing or influencing important company decisions

By collecting this information, FinCEN aims to create a centralized database that enhances transparency and accountability.

For a more detailed guide on what information needs to be reported, you can refer to FinCEN’s Small Entity Compliance Guide.

Next, we’ll discuss who needs to file a BOI report and the specific exemptions that might apply.

Who Needs to File a BOI Report?

Exemptions from BOI Reporting

Not every company needs to file a BOI report. The Corporate Transparency Act outlines specific exemptions to make the process more manageable. Let’s break down who is exempt and why.

Reporting Companies

Most corporations, LLCs, and other business entities registered with a state or tribal office need to file a BOI report. This includes small businesses that don’t meet certain exemption criteria.

Exemptions

There are 23 categories of entities that are exempt from filing. Here are some key exemptions:

  1. Publicly Traded Companies: Companies registered with the SEC don’t need to file. They’re already subject to strict reporting requirements.

  2. Tax-Exempt Not-for-Profits: Non-profits and similar organizations that qualify for tax-exempt status are exempt. This includes charities and religious organizations.

  3. Large Operating Companies: To qualify, a company must:

    • Have over 20 full-time employees in the U.S.
    • Show more than $5 million in gross receipts or sales on a federal tax return.
    • Maintain a physical office in the U.S.
  4. Subsidiaries of Exempt Entities: If a subsidiary is 100% owned or controlled by an exempt entity, it also qualifies for an exemption. However, partial ownership does not qualify.

  5. Regulated Public Utilities: Companies providing services like telecommunications, electricity, natural gas, water, and sewer services within the U.S. are exempt if they meet specific regulatory criteria.

To see the full list of exemptions, check out FinCEN’s FAQ page.

Special Cases

  • Fluctuating Companies: If a company’s size fluctuates above and below the threshold for the large operating company exemption, it must file a BOI report whenever it does not meet the exemption criteria. If it later qualifies again, it should file an updated report indicating its exempt status.

  • Trusts and Foundations: Whether these entities need to report depends on state laws and whether they are created by filing a document with a secretary of state or similar office.

Filing Updates

If your company becomes exempt after initially filing, you must update your report within 30 days to indicate the new exempt status. Likewise, if an exempt company loses its exemption, it must file a BOI report within 30 days.

For more details on exemptions and updates, refer to FinCEN’s Small Entity Compliance Guide.

Next, we’ll dive into how to file a BOI report and what you need to include.

How to File a BOI Report

Filing your Beneficial Ownership Information (BOI) report is straightforward. Here’s a step-by-step guide to help you through the process.

Electronic Filing

All BOI reports must be filed electronically through FinCEN’s BOI E-Filing website. This system is secure and provides a confirmation of receipt once your report is successfully submitted.

Steps to File:

  1. Access the BOI E-Filing System: Visit the FinCEN website and select “File BOIR.”
  2. Complete the Form: Fill out the online form or upload a completed PDF form.
  3. Submit Required Information: Enter details for beneficial owners and your company.
  4. Upload Document Images: Attach clear images of the identification documents.
  5. Review and Submit: Double-check all information for accuracy before submission.

Filing Deadlines

Meeting the filing deadlines is crucial to avoid penalties. Here’s what you need to know:

Existing Companies

If your company was created or registered before January 1, 2024, you must file your initial BOI report by January 1, 2025.

Newly Created Companies

For companies created or registered on or after January 1, 2024:

  • Within 90 Days: You have 90 calendar days from the date of creation or registration to file your report.
  • After January 1, 2025: New companies must file within 30 calendar days of receiving confirmation of their incorporation or registration.

Updates and Corrections

If there are any changes to your beneficial ownership information, you must update your report within 30 days of the change. This includes changes to the company’s legal name, ownership structure, or beneficial owners.

Example: If your company changes its legal name, you need to file an updated BOI report with the new name and previously reported information.

Compliance Guide

For more detailed information on filing deadlines and procedures, refer to FinCEN’s Small Entity Compliance Guide.

Next, let’s discuss the penalties for non-compliance with the BOI reporting requirements.

Penalties for Non-Compliance

Failing to file your BOI report correctly and on time can lead to serious penalties. Let’s break down what you need to know about the consequences of non-compliance.

Civil Penalties

If you don’t comply with the BOI reporting requirements, you can face hefty fines. The Corporate Transparency Act specifies that a person who willfully violates the requirements may be fined up to $500 per day for each day the violation continues. Adjusted for inflation, this amount is currently $591 per day.

Example: If you fail to report for 10 days, you could be fined up to $5,910.

Criminal Penalties

In addition to civil penalties, there are also criminal consequences for willful non-compliance. These penalties can include:

  • Fines: Up to $10,000.
  • Imprisonment: Up to two years.

Quote: “A person who willfully violates the BOI reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000.”

Willful Non-Filing and False Filing

Penalties apply not only for failing to file but also for submitting false information. Here’s what you need to know:

  • Willful Non-Filing: If you intentionally avoid filing your BOI report, you’re subject to both civil and criminal penalties.
  • False Filing: If you knowingly submit false information, the same penalties apply.

Example: If a company knowingly submits false beneficial ownership information, responsible individuals could face both fines and imprisonment.

Penalties for Senior Officers and Others

Both individuals and corporate entities can be held liable for willful violations. This includes:

  • Senior Officers: If they cause or are involved in the failure to report.
  • Beneficial Owners and Applicants: If they refuse to provide required information.

Fact: “An individual who willfully files a false or fraudulent beneficial ownership information report on a company’s behalf may be subject to the same civil and criminal penalties as the reporting company and its senior officers.” source

Safe Harbor Provision

There is a 90-day safe harbor provision. If you correct a mistake or omission within 90 days of the deadline, you may avoid penalties. This is crucial to remember if you realize an error after filing.

Example: If you discover an error in your BOI report and correct it within 90 days, you can avoid fines and other penalties.

Quote: “There does seem to be a 90-day safe harbor if somebody supplies inaccurate information but corrects the situation by filing an accurate report within that time.”

Understanding these penalties underscores the importance of filing your BOI report accurately and on time. In the next section, we’ll address some frequently asked questions to further clarify the BOI reporting process.

Frequently Asked Questions about BOI Reporting

What is a BOI Report?

A BOI report (Beneficial Ownership Information report) is a document that companies must file to disclose information about their beneficial owners. This requirement is part of the Corporate Transparency Act, enforced by FinCEN (Financial Crimes Enforcement Network). The goal is to increase transparency and prevent illegal activities such as money laundering and tax evasion.

What Information is Required in a BOI Report?

To complete a BOI report, you’ll need specific details about each beneficial owner. Here’s what you need to gather:

  • Full Name: The legal name of the beneficial owner.
  • Date of Birth: The exact date of birth.
  • Address: Current residential or business address.
  • Identification Number: This can be from a non-expired U.S. driver’s license, U.S. passport, or another state or local government-issued ID. If none of these are available, a non-expired foreign passport is acceptable.
  • Document Image: A clear image of the identification document used.

Additionally, you’ll need information about your company, such as:

  • Company Name: The legal name of your company.
  • Address: The principal business address.
  • Company Applicants: For companies created on or after January 1, 2024, information about the individuals who formed the company is also required.

Who Can Access BOI Information?

The information in a BOI report is confidential, but certain exceptions allow access:

  • Federal Officials: For national security, intelligence, and law enforcement purposes.
  • State and Local Officials: Under specific conditions related to law enforcement and regulatory oversight.
  • Tribal Officials: Similar to state and local officials, for law enforcement and regulatory purposes.
  • Foreign Officials: Under specific conditions and agreements.
  • Financial Institutions: With the company’s permission, to help comply with regulatory requirements.

FinCEN ensures that any access to BOI information is strictly controlled and monitored to protect confidentiality.

Understanding these aspects of BOI reporting can help ensure your company stays compliant and avoids penalties. For more detailed guidance, refer to FinCEN’s Small Entity Compliance Guide.

Conclusion

Navigating the BOI reporting requirements can be daunting, but it doesn’t have to be. At NR CPAs and Business Advisors, we specialize in providing personalized financial guidance tailored to your unique business needs. Our team is here to support you through every step of the BOI reporting process, ensuring you stay compliant and avoid penalties.

Personalized Financial Guidance

Every small business is different, and our approach reflects that. We take the time to understand your specific situation and provide advice that fits your needs. For example, Jane, a small bakery owner, saw significant improvements in her financial health after partnering with us. She received tailored advice on managing cash flow and identifying eligible tax deductions, allowing her to focus more on growing her business.

Compliance Assistance

Compliance with the Corporate Transparency Act is crucial, and we are here to help you meet all the requirements. Our team of experts will guide you through the electronic filing process on FinCEN’s website, ensuring you meet all deadlines and submit accurate information. We also provide training and assistance through partnerships with local Small Business Development Centers (SBDCs).

Local Accountant Services

Having a local accountant who understands your community and market can make a big difference. Our local accountant services ensure you receive the personalized attention you deserve. We work closely with you to understand your business’s specific needs and challenges, providing relevant and effective solutions to keep your business on track.

By partnering with NR CPAs and Business Advisors, you gain access to a team of experts dedicated to your success. From tax preparation to financial analysis, we offer a comprehensive range of services to keep your business on track.

Ready to ensure your business stays compliant with the Corporate Transparency Act? Contact us today to learn more about how we can help.

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