BOI Reporting Requirements for Small Businesses: Your Most Common Questions Answered

BOI Reporting Requirements for Small Businesses: Your Most Common Questions Answered
BOI Reporting Requirements for Small Businesses: Your Most Common Questions Answered
Have you heard about the mandated requirements for 2024 BOI reports, but you have questions about what the implications will be for your business? 

You are not alone; many businesses are navigating this. For some background, as of January 1, 2024, the Corporate Transparency Act (CTA) mandates businesses to submit Beneficial Ownership Information (BOI) reports to FinCEN.

FinCEN is the Financial Crimes Enforcement Network; therefore, noncompliance with this reporting requirement could result in civil and even criminal penalties. This has spurred some common questions for business owners, like 'Should I file a report?' or 'What is a beneficial owner?', and 'What is the deadline for this?’.

This article is for all business owners grappling with these common questions. We'll share insights to help your business proceed and answer them all!

Let's begin with the essentials.

What is a BOI Report?

The BOI Report, which stands for Beneficial Ownership Information Report or BOIR, is a detailed report that provides information about a business's ownership structure, highlighting individuals who have significant control over it.

The report includes important details such as the names and personal information of those who own or control the business. Companies must submit this comprehensive report to FinCEN, a bureau operating under the U.S. Department of the Treasury.

Which businesses are required to report Beneficial Ownership Information (BOI) to FinCEN?

Businesses obligated to report Beneficial Ownership Information (BOI) are categorized as 'reporting companies.' It's essential for a reporting company to submit BOI to FinCEN.

Please review the following categories to determine whether your organization is obligated to declare its BOI:

1. Domestic Entities

These are businesses established by submitting papers to US state authorities. This category includes corporations, partnerships, and limited liability firms, which may encompass your organization.

2. Foreign Entities

Businesses established outside the United States must file paperwork with state authorities to operate in the United States.

If your organization falls under either of these categories, it is a requirement to report Beneficial Ownership Information. This is a crucial step in maintaining compliance.

Who is the ‘Beneficial Owner’ of a reporting company?

FinCEN defines beneficial owners as individuals who either directly or indirectly:

1. Exercises Substantial Control over-reporting companies:

Individuals exercising substantial control over the reporting company are termed ‘beneficial owners’. This could involve holding high-level positions such as president, CEO, CFO, CPO, or General Counsel.

2. Possess or control at least 25% of the reporting company’s ownership interests:

Beneficial owners are individuals who own or control a minimum of 25% of a reporting company's ownership interest. Ownership interests can be in the form of shares of equity, stock, voting rights, capital or profit interest, convertible instruments, or any other mechanism to establish ownership.

A reporting company can have multiple beneficial owners.

Who is the ‘Company Applicant’ of a reporting company?

Companies created or registered on or after January 1, 2024, must report their company applicants. When a company needs to report its company applicants, they are limited to a maximum of two individuals who can qualify as applicants. These two individuals are defined as follows: 
  1. The individual who directly files the document that creates or registers the company.
  2. If more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing will also be considered a company applicant.

Do I have to report the company applicant details for my business?

Not all companies are obligated to reveal the company applicant information. Only companies established on or after January 1, 2024, must report their company applicant details. Entities established before this date are not obliged to report this information to FinCEN.

What Information is Required in the Beneficial Ownership Information (BOI) Report?

Businesses are required to provide the following information on their BOI Report:
  • Type of BOI Filing: Specify whether it is an initial BOI filing, correction, update, or new exempt entity.
  • Reporting Company: When a reporting company reports the BOI report for the first time, the following information is provided in the initial BOI report: 
  1. Full legal name
  2. Any and all trade names or “doing business as” (DBA) names
  3. A complete current U.S. street address
  4. The state, tribal, or foreign jurisdiction of formation.
  5. Taxpayer Identification Number (or, if a foreign reporting company has not been issued a TIN, a tax identification number issued by a foreign jurisdiction and the name of the jurisdiction).
  6. The state or tribal jurisdiction of first registration, in the case of a foreign reporting company.
  • Company Applicant: A reporting company will need to provide specific details about the individual who is a company applicant when filing the BOI with FinCEN:
  1. The individual's name
  2. Date of birth
  3. Address
  4. Unique identifying number and issuing jurisdiction from, and image of, one of the following non-expired documents
             i. U.S. passport
             ii. State driver’s license
             iii. Identification document issued by a state, local government, or tribe
             iv. Foreign passport if none of the above are available or applicable.
  • Beneficial Owner: The reporting company must provide the following required information about the beneficial owners when filing the BOI Report with FinCEN:
  1. Full legal name
  2. Date of Birth
  3. Current street address
  4. ID number, jurisdiction, and an image of one of the following non-expired documents:
            i. U.S. passport
            ii. State driver’s license
            iii. Identification document issued by a state, local government, or tribe
            iv. Foreign passport, if none of the above are available or applicable

When is the deadline for submitting BOI reports?

The deadline to file the BOI Report depends on when your company was registered:
  • Companies registered before January 1, 2024, must submit the initial BOI report by January 1, 2025.
  • Companies registered on or after January 1, 2024, will have 90 calendar days to file the BOI report after receiving actual or public notice that its registration is effective.
  • Companies registered on or after January 1, 2025, will have 30 calendar days to file the BOI report after receiving actual or public notice that its registration is effective.
  • Companies must file the updated or corrected BOI report within 30 days of any changes or updates to their company information or beneficial owners.

Which entities are exempt from BOI reporting requirements?

FinCEN has identified 23 categories of entities exempt from reporting BOI. The table below provides more information about them.

Exemption No

Entities Exempt from BOI reporting

1

Securities reporting issues

2

Governmental authority

3

Bank

4

Credit union

5

Depository institution holding company

6

Money services business

7

Broker or dealer in securities

8

Securities exchange or clearing agency

9

Other Exchange Act registered entity

10

An investment company or investment adviser

11

Venture capital fund adviser

12

Insurance company

13

State-licensed insurance provider

14

Commodity Exchange Act registered entity

15

Accounting firm

16

Public utility

17

Financial market utility

18

Pooled investment vehicle

19

Tax-exempt entity

20

Entity assisting a tax-exempt entity

21

Large operating company

22

Subsidiary of certain exempt entities

23

Inactive entity

 



What penalties do individuals face for violating BOI reporting requirements?

Under the Corporate Transparency Act, individuals who intentionally violate the BOI reporting requirements may face civil penalties of up to $591 per day, effective from January 25, 2024. This is an increase from the original penalty of $500, adjusted annually to account for inflation.

In addition to civil penalties, individuals who willfully violate BOI reporting requirements may face criminal penalties, including up to two years of imprisonment and a fine of up to $10,000. Examples of potential violations include: 
  • Failing to submit a report on beneficial ownership information.
  • Filing false information.
  • Neglecting to update previously submitted beneficial ownership information.

The Bottom line

In 2024, compliance with business requirements is essential, which may include filing a BOI report with FinCEN. You can file your BOIR on the FinCEN website or, for a more streamlined process, with e-filing services such as TaxBandits.

We understand that dealing with BOIR filings can be daunting. However, reputed e-filing providers like TaxBandits offer various pro features for Tax professionals and Business owners to ensure easy and accurate reporting.

We trust that this blog has dispelled the prevalent misconceptions surrounding BOI reports. Acquiring a firm grasp of BOI regulations is paramount for fostering transparency and upholding the integrity of your business endeavors.
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