Understanding the BOI Report

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In the constantly changing world of business regulation, the Beneficial Ownership Information Report (BOI) under the Corporate Transparency Act (CTA) marks a shift towards transparency and combating financial crime.

This new mandate, overseen by the Financial Crimes Enforcement Network (FinCEN), asks Limited Liability Companies (LLCs) and other business entities to disclose information about their beneficial owners.

The aim is straightforward: to combat money laundering and other illicit activities.

What you need to know about the BOI report

The BOI report is a document that LLCs and other business entities must file with the FinCEN.

Its primary purpose is to identify the beneficial owners of these businesses.

A beneficial owner is any individual who exercises substantial control over the entity or owns or controls a significant percentage (25% or more) of the entity’s equity interests.

An individual exercises substantial control over a reporting company if they are a senior officer, have the authority to appoint or remove officers/directors, make key decisions, or hold any other form of significant control as detailed in FinCEN guidance.

The reporting requirement extends to all domestic and foreign reporting companies registered to do business in the United States. This includes, but is not limited to, LLCs, corporations, and other entities created by filing a document with a state office.

Details required in the beneficial ownership report

The BOI report mandates the disclosure of both company and individual owner data.

Step-by-step guide to filing

Here’s a step-by-step guide to help you prepare, file, and comply with the BOI reporting requirements.

Preparation

1. Identify beneficial owners: Start by identifying all individuals who qualify as beneficial owners under the definition provided by FinCEN. This includes anyone with substantial control over the company or who owns at least 25% of the equity interests.
2. Gather necessary documents: Collect identification documents for each individual, such as passports or driver’s licenses. You’ll also need your company’s formation documents, Taxpayer Identification Number, and detailed information about the company’s operations and structure.
3. Review exemptions: Before proceeding, review the list of exemptions to ensure your entity is required to file. Some entities, based on their size, structure, or the nature of their business, might be exempt from the reporting requirements.

Filing process

1. Access FinCEN’s BOI e-filing Platform: Go to the FinCEN website’s BOI e-filing platform. If you’re a first-time user, you must create an account.
2. Select the Type of Filing: Choose from “Initial,” “Correct Prior Report,” or “Update Prior Report.”
3. Request to receive a FinCEN Identifier: You can request a unique identifying number for easier filing in the future. If you choose this, your ID number will be sent to you after submitting the report.
4. Fill Out the Report: Enter your company’s and its owners’ required information.
5. Upload Documents: Upload clear images of the identification documents for each beneficial owner.
6. Review and Submit: Before submitting, review the report to ensure all information is correct and complete. Once satisfied, submit the report.

After submission

1. Confirmation and records: You’ll receive a confirmation receipt after submitting. Keep this receipt and a copy of the submitted report for your records.
2. Stay updated: Regulations can change. Check for updates and be prepared to submit updated reports.
3. Report changes: If there are any changes in beneficial ownership or company information after you’ve filed the initial report, you must update this information within 30 days.

Deadlines and penalties

Deadlines

• Existing entities: For entities formed or registered on or before December 31, 2023, the deadline to submit the BOI report is before January 1, 2025.
• New entities: Entities formed or registered after January 1, 2024, have different deadlines. The BOI report must be filed within 30 days of receiving notice of the entity’s creation or registration. New entities must be proactive in understanding and fulfilling these requirements promptly.
• Updates and changes: As previously mentioned, any changes to beneficial ownership or the information previously reported must be updated within 30 days of the change.

Penalties

• Civil penalties: Fines of up to $500 per day for each day the violation continues, accumulating rapidly to significant amounts.
• Criminal penalties: More severe cases, especially those involving willful non-compliance with the reporting requirements, can lead to criminal charges. Convictions may result in fines of up to $10,000 and/or imprisonment for up to two years.

Exemptions

• Twenty-three total exemption categories exempt certain entities from having to file a BOI report.
• Businesses should reference FinCEN’s exemptions table to determine if they qualify to be excluded from the beneficial ownership reporting rules.
• Some common entities that do not have to file are:
• Companies with:
  • More than 20 full-time employees in the United States
  • Over $5,000,000 in annual U.S. gross receipts
  • A physical office located in the United States
  • Entities exempt from federal income tax under IRS Code 501(c)
  • Private equity firms and venture capital funds
• Subsidiaries of the following holding companies:
  • Insurance companies
  • Accounting firms
  • Banks
  • Credit unions