You may have heard about a new reporting requirement for your business and are wondering what it is or what you need to do. We’re here to help demystify the Beneficial Ownership Information (BOI) Reporting requirement that begins in 2024 and applies to most small businesses. Here are the nine key things you need to know to stay in compliance with this new requirement:
1. What is BOI Reporting?
BOI reporting is a new requirement that mandates many businesses to report who owns or controls their company to FinCEN, the Financial Crimes Enforcement Network. The requirement was created by Congress under the Corporate Transparency Act (CTA), passed in 2021, to help prevent illicit activities through shell companies or opaque ownership structures. This is part of a larger initiative to combat money laundering, terrorist financing, corruption, and tax fraud.
2. Do I Have to Report?
Most small businesses, including those operating as LLCs, S corporations, or partnerships, will need to file a BOI report. If your business was created by filing documents with your Secretary of State or a similar office, chances are, you are required to report. There are some exceptions—publicly traded companies, financial institutions, tax-exempt nonprofits, and a few others.
3. What If My Business Is Closed or Inactive?
Even if your business is inactive, you may still need to report. An inactive entity must file unless it meets all of the following criteria:
The entity was in existence on or before January 1, 2020.
It is not engaged in active business.
It is not owned by a foreign person.
There has been no change in ownership in the last 12 months.
The entity has not received or sent more than $1,000 in funds within the last year.
The entity holds no assets of any kind.
If your business is truly closed and meets these criteria, you may not need to file. However, if you’re winding down or temporarily inactive, it’s likely you’ll need to submit the report.
4. How Do I Report?
You can submit a BOI report online through FinCEN’s website starting January 2024. There’s no fee to file. At Balance Point, we’ll offer this service to ensure our clients stay in compliance without the hassle. Other professionals and online services may also provide this service, but fees can vary.
Here’s the information you’ll need to provide:
Company legal name and U.S. business address.
Any assumed business names (DBA).
Taxpayer Identification Number (TIN or EIN).
Each Beneficial Owner’s name, birthdate, residential address, and an identifying number (e.g., driver’s license or passport).
Information for each Company Applicant (the individual responsible for submitting the formation documents or registering the business after January 1, 2024).
A Beneficial Owner is defined as anyone who:
Exercises substantial control over the company, or
Owns or controls 25% or more of the company’s ownership interests.
If an entity owns 25% or more of the reporting company, the beneficial owners of that entity must also be reported.
5. When Must I Report?
For businesses in existence before January 1, 2024, you have until January 1, 2025 to file. For new businesses formed in 2024 or later, the report must be filed within 90 days of formation or registration.
6. What Happens If I Don’t File?
Failure to file can result in civil penalties of up to $500 per day for non-compliance. If you miss the deadline, we recommend filing as soon as possible to minimize penalties. Willful misreporting or disregarding the requirement could lead to criminal penalties, including up to two years in prison and fines up to $10,000. However, FinCEN has indicated that timely correction of errors can help avoid penalties.
7. What If I Make a Mistake on My Filing?
If you realize you made a mistake, you can submit a corrected report within 30 days of discovering the error. It’s important to act quickly to avoid penalties.
8. What If Something Changes With My Business?
If any changes occur—such as a change in beneficial ownership, business name, or any other key details—you must file an updated report within 30 days. If a beneficial owner gets a new identifying document that includes a changed name, address, or identifying number (like a new driver’s license), you must file an updated report, including the new ID. If you become an exempt entity after original filing, you should file a corrected report stating that you are newly exempt.
9. How Do I Get Help?
FinCEN provides a Small Business Guide and a list of FAQs on their website to help navigate these requirements. If you’re a Balance Point client, we’re happy to assist—just reach out to our team, and we’ll guide you through the process.
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