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As a business owner, you may have heard about the Beneficial Ownership Information (BOI) report. Filing this report is a new requirement that has significant implications for businesses. Let's explore what the BOI is, its origins, who needs to file it, why it’s important, and the penalties for failing to comply.
What is the BOI Report?
The BOI report is a requirement under the Corporate Transparency Act (CTA), which mandates certain businesses to disclose information about their beneficial owners. A beneficial owner is an individual who owns or controls at least 25% of a company’s ownership interests or exercises substantial control over the company.
This filing aims to combat money laundering, terrorism financing, and other illicit activities by creating transparency around who truly owns and controls businesses operating in the U.S.
Where Did the BOI Requirement Come From?
The CTA, enacted in 2021 as part of the National Defense Authorization Act, is a landmark anti-corruption measure. Administered by the Financial Crimes Enforcement Network (FinCEN), the BOI reporting rules became effective on January 1, 2024.
Who Must File the BOI Report?
The BOI report applies to most small and medium-sized businesses operating in the U.S., including corporations, LLCs, and other similar entities. However, there are exceptions, including:
Publicly traded companies
Larger companies with more than 20 employees, over $5 million in gross receipts or sales, and an operational presence in the U.S.
Certain regulated entities like banks, credit unions, and investment advisors
If your business was created on or after January 1, 2024, you must file your BOI report within 30 days of formation. For businesses established before 2024, the initial deadline to file is December 31, 2024.
Why is BOI Reporting Required?
The primary purpose of BOI reporting is to:
Prevent financial crimes by revealing the individuals behind shell companies and opaque ownership structures.
Provide law enforcement agencies with a tool to investigate suspicious activity.
Enhance the integrity of the U.S. financial system.
What Happens if You Don’t File?
Failing to file your BOI report, or submitting inaccurate information, can result in severe penalties, including:
Civil fines of up to $500 per day until the report is filed or corrected.
Criminal penalties, including fines up to $10,000 and up to two years in prison for willful violations.
How to File Your BOI Report
The good news? Filing the BOI report is:
Completely free: There are no fees associated with submitting your report although some business consulting companies are charging upwards of $100 or more to file on the business owners behalf
Quick and straightforward: The process takes about 5 minutes to complete.
Accessible online: You can submit your BOI report directly through FinCEN’s secure portal.
When filing, you’ll need to provide:
Identifying information about your business, including its legal name, address, and EIN or tax identification number.
Details of the beneficial owners, including names, birthdates, addresses, and a government-issued ID number with an image of the document.
Steps to Take Now
Determine your obligation: Review the filing requirements to see if your business qualifies.
Gather necessary information: Compile details about your business and beneficial owners.
File your BOI report: Visit FinCEN’s website and complete the report before the deadline.
The BOI report is a vital compliance measure to enhance transparency and curb illicit activities. Don’t wait until the last minute—filing your report is free, easy, and only takes a few minutes.
Avoid costly penalties and ensure your business remains in good standing by submitting your report before December 31, 2024.
Stay proactive, and let’s keep your business compliant!
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