Svetana Griffin
CPA, QBO ProAdvisor (Advanced)
What the New FinCEN Beneficial Ownership (BOI) Reporting Requirement Means for Your Small Business
The Financial Crimes Enforcement Network (FinCEN) has recently rolled out a significant regulatory measure known as the Beneficial Ownership Information (BOI) reporting requirement.
The purpose of this new law is to help create better transparency in corporate ownership in order to help prevent potential financial crimes such as money laundering and terrorist funding.
In this article, I will provide an outline of this new measure and the potential implications this has for your business.
Understanding the FinCEN BOI Reporting Requirement
At its core, this new reporting requirement mandates that certain companies disclose information about their beneficial owners.
Beneficial owners are individuals who have direct or indirect ownership or control over the company.
Who is required to file the new report?
Companies required to report are called reporting companies.
The number of companies required to file this report is estimated to be in the tens of millions and are comprised mostly of small and mid-sized businesses. These include both domestic companies and foreign companies registered to do business within the U.S.
According to the BOI Small Business Compliance Guide, there are only 23 entity types that are exempt from this reporting requirement:
- Securities reporting issuer
- Governmental authority
- Bank
- Credit union
- Depository institution holding company
- Money services business
- Broker or dealer in securities
- Securities exchange or clearing agency
- Other Exchange Act registered entity
- An investment company or investment adviser
- Venture capital fund adviser
- Insurance company
- State-licensed insurance producer
- Commodity Exchange Act registered entity
- Accounting firm
- Public utility
- Financial market utility
- Pooled investment vehicle
- Tax-exempt entity
- Entity assisting a tax-exempt entity
- Large operating company
- Subsidiary of certain exempt entities
- Inactive entity
Please Note: Even if you see your entity type listed above, it’s imperative that you consult with a qualified professional before determining whether or not your company is required to file.
When to file
A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial beneficial ownership information report.
A reporting company created or registered to do business on or after January 1, 2024, will have up to 90 calendar days from the time it receives its notice of registration to file its initial BOI Report.
For new entities created on or after January 1, 2025, that deadline will decrease to 30 days from notice of creation or registration of the entity.
What details are required
Reporting companies are required to provide the following information in their report:
- Personal Details: Detailed information about each beneficial owner, including their full legal name, date of birth, address, and identification number (such as a drivers license or passport number), etc.
- Entity Information: Legal entity name, trade names (if any), jurisdiction of formation, Tax Payer Identification Number (including EIN), etc.
- Verification Documentation: Companies must collect and maintain supporting documentation that helps validate the identity of the beneficial owners.
Consequences for Non-Compliance
Failure to comply with this new requirement carries significant consequences, including steep fines and personal legal troubles.
Companies who knowingly provide false information (including a false or fraudulent identifying photograph or document) or who neglect to report by the filing deadline can face civil BOI penalties of up to $500 per day, up to $10,000 and/or up to 2 years of imprisonment.
Conclusion
The FinCEN BOI reporting requirement presents difficult challenges for many businesses. By understanding the fundamental requirements, addressing potential compliance complications, and taking advantage of appropriate resources and solutions, businesses can navigate this regulatory issue and remain compliant with these new requirements.
As always, we highly recommend you consult with a qualified professional to help you navigate these new requirements as failure to properly comply can have serious implications for yourself personally as well as your business.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. We assume upon the information contained herein.