William E. Howe & Co., CPAs

Understanding Beneficial Ownership Information (BOI) Reporting Requirement

In an era where financial transparency is more important than ever, the Beneficial Ownership Information (BOI) reporting requirement stands as a critical element in the fight against illegal financial activities. The 2021 Corporate Transparency Act mandates that most entities disclose their beneficial owners’ details to the government. Let’s explore what this means for businesses and how it impacts the broader economic landscape.

What is Beneficial Ownership Information (BOI) Reporting?

BOI reporting requires companies to reveal details about individuals with significant control or ownership interests. This initiative, overseen by the Financial Crimes Enforcement Network (FinCEN), a part of the U.S. Treasury Department, aims to prevent the concealment of illegally obtained funds through complex business structures.

Who Is Required to Report?

Generally, the requirement applies to:

• Corporations

• Limited Liability Companies (LLCs)

• Other entities registered to do business in the United States

An individual is a beneficial owner if they directly or indirectly control or own at least 25% of a company. However, there are twenty-three entities that are exempt, which include publicly traded companies, nonprofits, and certain large operating companies. To review all the exceptions, visit FinCEN’s website (https://www.fincen.gov).

Filing Requirements And Process

Entities must file their BOI report on FinCEN’s website (https://www.fincen.gov). Examples of what the report must include are:

• The company’s legal name, address, and tax identification number

• Identifying information for each beneficial owner, including name, address, date of birth, and an image of an identification document (like a passport or driver’s license)

Deadlines And Compliance

The deadlines are as follows:

• Existing entities (as of January 1, 2024) must file by January 1, 2025.

• New entities formed after January 1, 2024, have a 90-day filing window, which will reduce to 30 days starting in 2025.

• Changes in beneficial ownership or company details require updated filings.

Failure to comply can result in significant penalties ($500 per day), including fines (up to $10,000) and potential criminal charges (up to two years).

The American Bar Association points out that the fines accrue. If an initial report were not filed, and several report changes would have been made if that report was on file, aggregated fines may be well more than $10,000 - even before the reporting company receives a notice of violation from FinCEN. With steep penalties such as these, reporting companies and their beneficial owners and senior officers will want to ensure they comply.

The Impact On Businesses And The Economy

As for the broader implications, BOI will allow for:

• Increased Transparency: It provides a clearer picture of who ultimately owns and controls businesses, helping to combat money laundering and terrorist financing.

• Compliance Burden: Smaller businesses may find the additional reporting requirements burdensome.

• Legal Considerations: Businesses must ensure they understand the legal aspects of compliance, which may require consulting with legal experts.

The Role Of Accountants Versus Legal Advisors

Accountants can help with financial details for BOI filings, but the filing process itself is a legal matter. Therefore, businesses are encouraged to seek legal counsel for BOI compliance.

Be Aware Of Scammers

FinCEN warns of recent fraud attempts targeting individuals and entities subject to BOI reporting. It’s been reported that letters and emails are being sent with phone numbers, websites, and QR codes that connect you to fraudulent sources. Please be careful that you’re filing directly on FinCEN’s website (https://www.fincen.gov). If you do decide to enlist a third party, be sure it’s a trusted legal source.

Conclusion

In summary, the BOI reporting requirement marks a significant step in enhancing corporate transparency and combating financial crimes. Businesses must stay informed and proactive in complying with these regulations to avoid huge penalties.

For more detailed guidance, businesses should consult the resources and guides on FinCEN’s website (https://www.fincen.gov) and consider seeking legal advice for compliance assurance.